Correlation Between PT Indofood and PT Cilacap

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

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

Diversification Opportunities for PT Indofood and PT Cilacap

-0.72

Correlation Coefficient

PT Indofood  PT Cilacap

Pay attention - limited upside

The 3 months correlation between INDF and ASHA is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding PT Indofood Sukses and PT Cilacap Samudera in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Cilacap Samudera and PT Indofood 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 PT Indofood Sukses are associated (or correlated) with PT Cilacap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Cilacap Samudera has no effect on the direction of PT Indofood i.e., PT Indofood and PT Cilacap go up and down completely randomly.

Pair Corralation between PT Indofood and PT Cilacap

Assuming the 90 days trading horizon PT Indofood Sukses is expected to generate 0.3 times more return on investment than PT Cilacap. However, PT Indofood Sukses is 3.3 times less risky than PT Cilacap. It trades about 0.16 of its potential returns per unit of risk. PT Cilacap Samudera is currently generating about -0.05 per unit of risk. If you would invest  710,000  in PT Indofood Sukses on September 14, 2024 and sell it today you would earn a total of  107,500  from holding PT Indofood Sukses or generate 15.14% return on investment over 90 days.

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

PT Indofood Sukses  vs.  PT Cilacap Samudera

PT Indofood Sukses

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PT Indofood Sukses are ranked lower than 12 (%) 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.

PT Cilacap Samudera

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Cilacap Samudera 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 PT Indofood and PT Cilacap

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

The idea behind PT Indofood Sukses and PT Cilacap Samudera 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.