Correlation Between PT Indofood and PT Saraswanti

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

Diversification Opportunities for PT Indofood and PT Saraswanti

-0.74

Correlation Coefficient

PT Indofood  PT Saraswanti

Pay attention - limited upside

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

Pair Corralation between PT Indofood and PT Saraswanti

Assuming the 90 days trading horizon PT Indofood Sukses is expected to generate 0.76 times more return on investment than PT Saraswanti. However, PT Indofood Sukses is 1.31 times less risky than PT Saraswanti. It trades about 0.06 of its potential returns per unit of risk. PT Saraswanti Indoland is currently generating about -0.11 per unit of risk. If you would invest  722,500  in PT Indofood Sukses on September 26, 2024 and sell it today you would earn a total of  42,500  from holding PT Indofood Sukses or generate 5.88% 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 Saraswanti Indoland

PT Indofood Sukses

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PT Indofood Sukses are ranked lower than 5 (%) 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.

PT Saraswanti Indoland

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Saraswanti Indoland 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 Saraswanti

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

The idea behind PT Indofood Sukses and PT Saraswanti Indoland 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.