Correlation Between PT Indofood and Xinhua Winshare

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

Diversification Opportunities for PT Indofood and Xinhua Winshare

0.77

Correlation Coefficient

PT Indofood  Xinhua Winshare

Poor diversification

The 3 months correlation between ISM and Xinhua is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding PT Indofood Sukses and Xinhua Winshare Publishing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xinhua Winshare Publ 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 Xinhua Winshare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xinhua Winshare Publ has no effect on the direction of PT Indofood i.e., PT Indofood and Xinhua Winshare go up and down completely randomly.

Pair Corralation between PT Indofood and Xinhua Winshare

Assuming the 90 days horizon PT Indofood is expected to generate 1.92 times less return on investment than Xinhua Winshare. In addition to that, PT Indofood is 1.02 times more volatile than Xinhua Winshare Publishing. It trades about 0.08 of its total potential returns per unit of risk. Xinhua Winshare Publishing is currently generating about 0.15 per unit of volatility. If you would invest  89.00  in Xinhua Winshare Publishing on September 4, 2024 and sell it today you would earn a total of  27.00  from holding Xinhua Winshare Publishing or generate 30.34% return on investment over 90 days.

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

PT Indofood Sukses  vs.  Xinhua Winshare Publishing

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 nearly fragile basic indicators, PT Indofood reported solid returns over the last few months and may actually be approaching a breakup point.

Xinhua Winshare Publ

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xinhua Winshare Publishing are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Xinhua Winshare reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Indofood and Xinhua Winshare

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

The idea behind PT Indofood Sukses and Xinhua Winshare Publishing 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.