Correlation Between PT Indofood and Kraft Heinz

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

Diversification Opportunities for PT Indofood and Kraft Heinz

-0.58

Correlation Coefficient

PT Indofood  Kraft Heinz

Excellent diversification

The 3 months correlation between ISM and Kraft is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding PT Indofood Sukses and Kraft Heinz Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kraft Heinz 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 Kraft Heinz. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kraft Heinz has no effect on the direction of PT Indofood i.e., PT Indofood and Kraft Heinz go up and down completely randomly.

Pair Corralation between PT Indofood and Kraft Heinz

Assuming the 90 days horizon PT Indofood Sukses is expected to generate 2.27 times more return on investment than Kraft Heinz. However, PT Indofood is 2.27 times more volatile than Kraft Heinz Co. It trades about 0.08 of its potential returns per unit of risk. Kraft Heinz Co is currently generating about -0.05 per unit of risk. If you would invest  40.00  in PT Indofood Sukses on September 20, 2024 and sell it today you would earn a total of  6.00  from holding PT Indofood Sukses or generate 15.0% return on investment over 90 days.

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

PT Indofood Sukses  vs.  Kraft Heinz Co

PT Indofood Sukses

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PT Indofood Sukses are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PT Indofood reported solid returns over the last few months and may actually be approaching a breakup point.

Kraft Heinz

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kraft Heinz Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Kraft Heinz is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PT Indofood and Kraft Heinz

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

The idea behind PT Indofood Sukses and Kraft Heinz Co 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.