Correlation Between Austindo Nusantara and PT Indofood

Can any of the company-specific risk be diversified away by investing in both Austindo Nusantara and PT Indofood 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 Austindo Nusantara and PT Indofood into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Austindo Nusantara Jaya and PT Indofood Sukses, you can compare the effects of market volatilities on Austindo Nusantara and PT Indofood 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 Austindo Nusantara with a short position of PT Indofood. Check out your portfolio center. Please also check ongoing floating volatility patterns of Austindo Nusantara and PT Indofood.

Diversification Opportunities for Austindo Nusantara and PT Indofood

0.81

Correlation Coefficient

Austindo Nusantara  PT Indofood

Very poor diversification

The 3 months correlation between Austindo and INDF is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Austindo Nusantara Jaya and PT Indofood Sukses in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Indofood Sukses and Austindo Nusantara 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 Austindo Nusantara Jaya are associated (or correlated) with PT Indofood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Indofood Sukses has no effect on the direction of Austindo Nusantara i.e., Austindo Nusantara and PT Indofood go up and down completely randomly.

Pair Corralation between Austindo Nusantara and PT Indofood

Assuming the 90 days trading horizon Austindo Nusantara Jaya is expected to under-perform the PT Indofood. In addition to that, Austindo Nusantara is 1.23 times more volatile than PT Indofood Sukses. It trades about -0.03 of its total potential returns per unit of risk. PT Indofood Sukses is currently generating about 0.04 per unit of volatility. If you would invest  700,955  in PT Indofood Sukses on September 12, 2024 and sell it today you would earn a total of  119,045  from holding PT Indofood Sukses or generate 16.98% return on investment over 90 days.

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

Austindo Nusantara Jaya  vs.  PT Indofood Sukses

Austindo Nusantara Jaya

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Austindo Nusantara Jaya are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Austindo Nusantara is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

PT Indofood Sukses

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PT Indofood Sukses are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, PT Indofood disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Austindo Nusantara and PT Indofood

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

The idea behind Austindo Nusantara Jaya and PT Indofood Sukses 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.

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 Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.