Correlation Between AUSNUTRIA DAIRY and INDOFOOD AGRI

Can any of the company-specific risk be diversified away by investing in both AUSNUTRIA DAIRY and INDOFOOD AGRI 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 AUSNUTRIA DAIRY and INDOFOOD AGRI into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AUSNUTRIA DAIRY and INDOFOOD AGRI RES, you can compare the effects of market volatilities on AUSNUTRIA DAIRY and INDOFOOD AGRI 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 AUSNUTRIA DAIRY with a short position of INDOFOOD AGRI. Check out your portfolio center. Please also check ongoing floating volatility patterns of AUSNUTRIA DAIRY and INDOFOOD AGRI.

Diversification Opportunities for AUSNUTRIA DAIRY and INDOFOOD AGRI

0.46

Correlation Coefficient

AUSNUTRIA DAIRY  INDOFOOD AGRI

Very weak diversification

The 3 months correlation between AUSNUTRIA and INDOFOOD is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding AUSNUTRIA DAIRY and INDOFOOD AGRI RES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INDOFOOD AGRI RES and AUSNUTRIA DAIRY 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 AUSNUTRIA DAIRY are associated (or correlated) with INDOFOOD AGRI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INDOFOOD AGRI RES has no effect on the direction of AUSNUTRIA DAIRY i.e., AUSNUTRIA DAIRY and INDOFOOD AGRI go up and down completely randomly.

Pair Corralation between AUSNUTRIA DAIRY and INDOFOOD AGRI

Assuming the 90 days trading horizon AUSNUTRIA DAIRY is expected to generate 0.9 times more return on investment than INDOFOOD AGRI. However, AUSNUTRIA DAIRY is 1.12 times less risky than INDOFOOD AGRI. It trades about 0.08 of its potential returns per unit of risk. INDOFOOD AGRI RES is currently generating about 0.04 per unit of risk. If you would invest  23.00  in AUSNUTRIA DAIRY on September 10, 2024 and sell it today you would earn a total of  2.00  from holding AUSNUTRIA DAIRY or generate 8.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

AUSNUTRIA DAIRY  vs.  INDOFOOD AGRI RES

AUSNUTRIA DAIRY

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AUSNUTRIA DAIRY are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical indicators, AUSNUTRIA DAIRY may actually be approaching a critical reversion point that can send shares even higher in January 2025.

INDOFOOD AGRI RES

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in INDOFOOD AGRI RES are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, INDOFOOD AGRI is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with AUSNUTRIA DAIRY and INDOFOOD AGRI

The main advantage of trading using opposite AUSNUTRIA DAIRY and INDOFOOD AGRI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AUSNUTRIA DAIRY position performs unexpectedly, INDOFOOD AGRI 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 INDOFOOD AGRI will offset losses from the drop in INDOFOOD AGRI's long position.

The idea behind AUSNUTRIA DAIRY and INDOFOOD AGRI RES pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.