Correlation Between PT Indofood and Victoria Insurance

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

Diversification Opportunities for PT Indofood and Victoria Insurance

-0.66

Correlation Coefficient

PT Indofood  Victoria Insurance

Excellent diversification

The 3 months correlation between INDF and Victoria is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding PT Indofood Sukses and Victoria Insurance Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victoria Insurance 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 Victoria Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Victoria Insurance Tbk has no effect on the direction of PT Indofood i.e., PT Indofood and Victoria Insurance go up and down completely randomly.

Pair Corralation between PT Indofood and Victoria Insurance

Assuming the 90 days trading horizon PT Indofood Sukses is expected to generate 1.04 times more return on investment than Victoria Insurance. However, PT Indofood is 1.04 times more volatile than Victoria Insurance Tbk. It trades about 0.14 of its potential returns per unit of risk. Victoria Insurance Tbk is currently generating about -0.13 per unit of risk. If you would invest  710,000  in PT Indofood Sukses on September 17, 2024 and sell it today you would earn a total of  97,500  from holding PT Indofood Sukses or generate 13.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

PT Indofood Sukses  vs.  Victoria Insurance Tbk

PT Indofood Sukses

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PT Indofood Sukses are ranked lower than 10 (%) 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.

Victoria Insurance Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Victoria Insurance Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with PT Indofood and Victoria Insurance

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

The idea behind PT Indofood Sukses and Victoria Insurance 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.