Correlation Between Indofood Sukses and CTR Investments

Can any of the company-specific risk be diversified away by investing in both Indofood Sukses and CTR Investments 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 Indofood Sukses and CTR Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Indofood Sukses Makmur and CTR Investments Consulting, you can compare the effects of market volatilities on Indofood Sukses and CTR Investments 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 Indofood Sukses with a short position of CTR Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indofood Sukses and CTR Investments.

Diversification Opportunities for Indofood Sukses and CTR Investments

-0.46

Correlation Coefficient

Indofood Sukses  CTR Investments

Very good diversification

The 3 months correlation between Indofood and CTR is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Indofood Sukses Makmur and CTR Investments Consulting in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CTR Investments Cons and Indofood Sukses 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 Indofood Sukses Makmur are associated (or correlated) with CTR Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CTR Investments Cons has no effect on the direction of Indofood Sukses i.e., Indofood Sukses and CTR Investments go up and down completely randomly.

Pair Corralation between Indofood Sukses and CTR Investments

Assuming the 90 days horizon Indofood Sukses is expected to generate 17.68 times less return on investment than CTR Investments. But when comparing it to its historical volatility, Indofood Sukses Makmur is 7.22 times less risky than CTR Investments. It trades about 0.03 of its potential returns per unit of risk. CTR Investments Consulting is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  0.08  in CTR Investments Consulting on September 27, 2024 and sell it today you would lose (0.06) from holding CTR Investments Consulting or give up 75.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Indofood Sukses Makmur  vs.  CTR Investments Consulting

Indofood Sukses Makmur

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Indofood Sukses Makmur are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Indofood Sukses showed solid returns over the last few months and may actually be approaching a breakup point.

CTR Investments Cons

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CTR Investments Consulting has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Indofood Sukses and CTR Investments

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

The idea behind Indofood Sukses Makmur and CTR Investments Consulting 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.