Correlation Between INDOFOOD AGRI and IMPERIAL TOBACCO
Can any of the company-specific risk be diversified away by investing in both INDOFOOD AGRI and IMPERIAL TOBACCO at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining INDOFOOD AGRI and IMPERIAL TOBACCO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between INDOFOOD AGRI RES and IMPERIAL TOBACCO , you can compare the effects of market volatilities on INDOFOOD AGRI and IMPERIAL TOBACCO and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in INDOFOOD AGRI with a short position of IMPERIAL TOBACCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of INDOFOOD AGRI and IMPERIAL TOBACCO.
Diversification Opportunities for INDOFOOD AGRI and IMPERIAL TOBACCO
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between INDOFOOD and IMPERIAL is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding INDOFOOD AGRI RES and IMPERIAL TOBACCO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IMPERIAL TOBACCO and INDOFOOD AGRI is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on INDOFOOD AGRI RES are associated (or correlated) with IMPERIAL TOBACCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IMPERIAL TOBACCO has no effect on the direction of INDOFOOD AGRI i.e., INDOFOOD AGRI and IMPERIAL TOBACCO go up and down completely randomly.
Pair Corralation between INDOFOOD AGRI and IMPERIAL TOBACCO
Assuming the 90 days trading horizon INDOFOOD AGRI is expected to generate 26.81 times less return on investment than IMPERIAL TOBACCO. In addition to that, INDOFOOD AGRI is 1.81 times more volatile than IMPERIAL TOBACCO . It trades about 0.01 of its total potential returns per unit of risk. IMPERIAL TOBACCO is currently generating about 0.47 per unit of volatility. If you would invest 2,760 in IMPERIAL TOBACCO on September 3, 2024 and sell it today you would earn a total of 319.00 from holding IMPERIAL TOBACCO or generate 11.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
INDOFOOD AGRI RES vs. IMPERIAL TOBACCO
Performance |
| Timeline |
| INDOFOOD AGRI RES |
| IMPERIAL TOBACCO |
INDOFOOD AGRI and IMPERIAL TOBACCO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with INDOFOOD AGRI and IMPERIAL TOBACCO
The main advantage of trading using opposite INDOFOOD AGRI and IMPERIAL TOBACCO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INDOFOOD AGRI position performs unexpectedly, IMPERIAL TOBACCO can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in IMPERIAL TOBACCO will offset losses from the drop in IMPERIAL TOBACCO's long position.| INDOFOOD AGRI vs. TOTAL GABON | INDOFOOD AGRI vs. Walgreens Boots Alliance | INDOFOOD AGRI vs. Peak Resources Limited |
| IMPERIAL TOBACCO vs. Gamma Communications plc | IMPERIAL TOBACCO vs. WisdomTree Investments | IMPERIAL TOBACCO vs. Strategic Investments AS | IMPERIAL TOBACCO vs. ECHO INVESTMENT ZY |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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