Correlation Between INDOFOOD AGRI and LIFEWAY FOODS
Can any of the company-specific risk be diversified away by investing in both INDOFOOD AGRI and LIFEWAY FOODS 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 LIFEWAY FOODS 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 LIFEWAY FOODS, you can compare the effects of market volatilities on INDOFOOD AGRI and LIFEWAY FOODS 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 LIFEWAY FOODS. Check out your portfolio center. Please also check ongoing floating volatility patterns of INDOFOOD AGRI and LIFEWAY FOODS.
Diversification Opportunities for INDOFOOD AGRI and LIFEWAY FOODS
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between INDOFOOD and LIFEWAY is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding INDOFOOD AGRI RES and LIFEWAY FOODS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LIFEWAY FOODS 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 LIFEWAY FOODS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LIFEWAY FOODS has no effect on the direction of INDOFOOD AGRI i.e., INDOFOOD AGRI and LIFEWAY FOODS go up and down completely randomly.
Pair Corralation between INDOFOOD AGRI and LIFEWAY FOODS
Assuming the 90 days trading horizon INDOFOOD AGRI is expected to generate 5.15 times less return on investment than LIFEWAY FOODS. But when comparing it to its historical volatility, INDOFOOD AGRI RES is 1.74 times less risky than LIFEWAY FOODS. It trades about 0.01 of its potential returns per unit of risk. LIFEWAY FOODS is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,260 in LIFEWAY FOODS on September 3, 2024 and sell it today you would earn a total of 20.00 from holding LIFEWAY FOODS or generate 0.88% 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. LIFEWAY FOODS
Performance |
| Timeline |
| INDOFOOD AGRI RES |
| LIFEWAY FOODS |
INDOFOOD AGRI and LIFEWAY FOODS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with INDOFOOD AGRI and LIFEWAY FOODS
The main advantage of trading using opposite INDOFOOD AGRI and LIFEWAY FOODS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INDOFOOD AGRI position performs unexpectedly, LIFEWAY FOODS 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 LIFEWAY FOODS will offset losses from the drop in LIFEWAY FOODS's long position.| INDOFOOD AGRI vs. TOTAL GABON | INDOFOOD AGRI vs. Walgreens Boots Alliance | INDOFOOD AGRI vs. Peak Resources Limited |
| LIFEWAY FOODS vs. TOTAL GABON | LIFEWAY FOODS vs. Walgreens Boots Alliance | LIFEWAY FOODS vs. Peak Resources Limited |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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