Correlation Between PT Indofood and Paninvest Tbk

Can any of the company-specific risk be diversified away by investing in both PT Indofood and Paninvest Tbk 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 Paninvest Tbk 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 Paninvest Tbk, you can compare the effects of market volatilities on PT Indofood and Paninvest Tbk 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 Paninvest Tbk. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Indofood and Paninvest Tbk.

Diversification Opportunities for PT Indofood and Paninvest Tbk

0.74

Correlation Coefficient

PT Indofood  Paninvest Tbk

Poor diversification

The 3 months correlation between INDF and Paninvest is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding PT Indofood Sukses and Paninvest Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paninvest Tbk 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 Paninvest Tbk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paninvest Tbk has no effect on the direction of PT Indofood i.e., PT Indofood and Paninvest Tbk go up and down completely randomly.

Pair Corralation between PT Indofood and Paninvest Tbk

Assuming the 90 days trading horizon PT Indofood is expected to generate 1.16 times less return on investment than Paninvest Tbk. But when comparing it to its historical volatility, PT Indofood Sukses is 1.86 times less risky than Paninvest Tbk. It trades about 0.12 of its potential returns per unit of risk. Paninvest Tbk is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  95,500  in Paninvest Tbk on September 3, 2024 and sell it today you would earn a total of  11,000  from holding Paninvest Tbk or generate 11.52% return on investment over 90 days.

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

PT Indofood Sukses  vs.  Paninvest Tbk

PT Indofood Sukses

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PT Indofood Sukses are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, PT Indofood may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Paninvest Tbk

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Paninvest Tbk are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Paninvest Tbk disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Indofood and Paninvest Tbk

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

The idea behind PT Indofood Sukses and Paninvest Tbk 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.