Correlation Between INDOFOOD AGRI and Tsingtao Brewery
Can any of the company-specific risk be diversified away by investing in both INDOFOOD AGRI and Tsingtao Brewery 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 Tsingtao Brewery 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 Tsingtao Brewery, you can compare the effects of market volatilities on INDOFOOD AGRI and Tsingtao Brewery 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 Tsingtao Brewery. Check out your portfolio center. Please also check ongoing floating volatility patterns of INDOFOOD AGRI and Tsingtao Brewery.
Diversification Opportunities for INDOFOOD AGRI and Tsingtao Brewery
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between INDOFOOD and Tsingtao is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding INDOFOOD AGRI RES and Tsingtao Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsingtao Brewery 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 Tsingtao Brewery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tsingtao Brewery has no effect on the direction of INDOFOOD AGRI i.e., INDOFOOD AGRI and Tsingtao Brewery go up and down completely randomly.
Pair Corralation between INDOFOOD AGRI and Tsingtao Brewery
Assuming the 90 days trading horizon INDOFOOD AGRI is expected to generate 2.02 times less return on investment than Tsingtao Brewery. But when comparing it to its historical volatility, INDOFOOD AGRI RES is 1.64 times less risky than Tsingtao Brewery. It trades about 0.02 of its potential returns per unit of risk. Tsingtao Brewery is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 508.00 in Tsingtao Brewery on September 25, 2024 and sell it today you would earn a total of 152.00 from holding Tsingtao Brewery or generate 29.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
INDOFOOD AGRI RES vs. Tsingtao Brewery
Performance |
| Timeline |
| INDOFOOD AGRI RES |
| Tsingtao Brewery |
INDOFOOD AGRI and Tsingtao Brewery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with INDOFOOD AGRI and Tsingtao Brewery
The main advantage of trading using opposite INDOFOOD AGRI and Tsingtao Brewery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INDOFOOD AGRI position performs unexpectedly, Tsingtao Brewery 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 Tsingtao Brewery will offset losses from the drop in Tsingtao Brewery's long position.| INDOFOOD AGRI vs. ON SEMICONDUCTOR | INDOFOOD AGRI vs. BE Semiconductor Industries | INDOFOOD AGRI vs. National Beverage Corp | INDOFOOD AGRI vs. UNITED UTILITIES GR |
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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 Global Correlations module to find global opportunities by holding instruments from different markets.
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