Correlation Between Japfa Comfeed and Fortune Indonesia

Can any of the company-specific risk be diversified away by investing in both Japfa Comfeed and Fortune Indonesia 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 Japfa Comfeed and Fortune Indonesia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Japfa Comfeed Indonesia and Fortune Indonesia Tbk, you can compare the effects of market volatilities on Japfa Comfeed and Fortune Indonesia 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 Japfa Comfeed with a short position of Fortune Indonesia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japfa Comfeed and Fortune Indonesia.

Diversification Opportunities for Japfa Comfeed and Fortune Indonesia

0.69

Correlation Coefficient

Japfa Comfeed  Fortune Indonesia

Poor diversification

The 3 months correlation between Japfa and Fortune is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Japfa Comfeed Indonesia and Fortune Indonesia Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortune Indonesia Tbk and Japfa Comfeed 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 Japfa Comfeed Indonesia are associated (or correlated) with Fortune Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortune Indonesia Tbk has no effect on the direction of Japfa Comfeed i.e., Japfa Comfeed and Fortune Indonesia go up and down completely randomly.

Pair Corralation between Japfa Comfeed and Fortune Indonesia

Assuming the 90 days trading horizon Japfa Comfeed is expected to generate 1.93 times less return on investment than Fortune Indonesia. But when comparing it to its historical volatility, Japfa Comfeed Indonesia is 3.5 times less risky than Fortune Indonesia. It trades about 0.16 of its potential returns per unit of risk. Fortune Indonesia Tbk is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  292,000  in Fortune Indonesia Tbk on September 23, 2024 and sell it today you would earn a total of  87,000  from holding Fortune Indonesia Tbk or generate 29.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Japfa Comfeed Indonesia  vs.  Fortune Indonesia Tbk

Japfa Comfeed Indonesia

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Japfa Comfeed Indonesia are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Japfa Comfeed disclosed solid returns over the last few months and may actually be approaching a breakup point.

Fortune Indonesia Tbk

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fortune Indonesia Tbk are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Fortune Indonesia disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Japfa Comfeed and Fortune Indonesia

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

The idea behind Japfa Comfeed Indonesia and Fortune Indonesia 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .