Correlation Between PT Indofood and Siantar Top

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

Diversification Opportunities for PT Indofood and Siantar Top

-0.75

Correlation Coefficient

PT Indofood  Siantar Top

Pay attention - limited upside

The 3 months correlation between INDF and Siantar is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding PT Indofood Sukses and Siantar Top Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siantar Top 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 Siantar Top. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siantar Top Tbk has no effect on the direction of PT Indofood i.e., PT Indofood and Siantar Top go up and down completely randomly.

Pair Corralation between PT Indofood and Siantar Top

Assuming the 90 days trading horizon PT Indofood Sukses is expected to generate 0.95 times more return on investment than Siantar Top. However, PT Indofood Sukses is 1.05 times less risky than Siantar Top. It trades about 0.14 of its potential returns per unit of risk. Siantar Top Tbk is currently generating about -0.16 per unit of risk. If you would invest  707,500  in PT Indofood Sukses on September 18, 2024 and sell it today you would earn a total of  100,000  from holding PT Indofood Sukses or generate 14.13% 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.  Siantar Top Tbk

PT Indofood Sukses

Risk-Adjusted Performance

11 of 100

OK

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.

Siantar Top Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Siantar Top Tbk 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 Siantar Top

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

The idea behind PT Indofood Sukses and Siantar Top 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.