Correlation Between Falmaco Nonwoven and Fast Food

Can any of the company-specific risk be diversified away by investing in both Falmaco Nonwoven and Fast Food 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 Falmaco Nonwoven and Fast Food into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Falmaco Nonwoven Industri and Fast Food Indonesia, you can compare the effects of market volatilities on Falmaco Nonwoven and Fast Food 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 Falmaco Nonwoven with a short position of Fast Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Falmaco Nonwoven and Fast Food.

Diversification Opportunities for Falmaco Nonwoven and Fast Food

-0.51

Correlation Coefficient

Falmaco Nonwoven  Fast Food

Excellent diversification

The 3 months correlation between Falmaco and Fast is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Falmaco Nonwoven Industri and Fast Food Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Food Indonesia and Falmaco Nonwoven 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 Falmaco Nonwoven Industri are associated (or correlated) with Fast Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fast Food Indonesia has no effect on the direction of Falmaco Nonwoven i.e., Falmaco Nonwoven and Fast Food go up and down completely randomly.

Pair Corralation between Falmaco Nonwoven and Fast Food

Assuming the 90 days trading horizon Falmaco Nonwoven Industri is expected to under-perform the Fast Food. In addition to that, Falmaco Nonwoven is 3.32 times more volatile than Fast Food Indonesia. It trades about -0.13 of its total potential returns per unit of risk. Fast Food Indonesia is currently generating about -0.14 per unit of volatility. If you would invest  33,000  in Fast Food Indonesia on September 15, 2024 and sell it today you would lose (1,800) from holding Fast Food Indonesia or give up 5.45% of portfolio value over 90 days.

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

Falmaco Nonwoven Industri  vs.  Fast Food Indonesia

Falmaco Nonwoven Industri

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Falmaco Nonwoven Industri has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Falmaco Nonwoven is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Fast Food Indonesia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fast Food Indonesia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Falmaco Nonwoven and Fast Food

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

The idea behind Falmaco Nonwoven Industri and Fast Food Indonesia 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.