Correlation Between Indofood Sukses and Silver Scott

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

Diversification Opportunities for Indofood Sukses and Silver Scott

-0.31

Correlation Coefficient

Indofood Sukses  Silver Scott

Very good diversification

The 3 months correlation between Indofood and Silver is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Indofood Sukses Makmur and Silver Scott Mines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silver Scott Mines 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 Silver Scott. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silver Scott Mines has no effect on the direction of Indofood Sukses i.e., Indofood Sukses and Silver Scott go up and down completely randomly.

Pair Corralation between Indofood Sukses and Silver Scott

Assuming the 90 days horizon Indofood Sukses is expected to generate 8.63 times less return on investment than Silver Scott. But when comparing it to its historical volatility, Indofood Sukses Makmur is 9.48 times less risky than Silver Scott. It trades about 0.06 of its potential returns per unit of risk. Silver Scott Mines is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3.73  in Silver Scott Mines on September 14, 2024 and sell it today you would lose (2.00) from holding Silver Scott Mines or give up 53.62% of portfolio value over 90 days.

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

Indofood Sukses Makmur  vs.  Silver Scott Mines

Indofood Sukses Makmur

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Indofood Sukses Makmur are ranked lower than 5 (%) 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.

Silver Scott Mines

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Silver Scott Mines are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile essential indicators, Silver Scott unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Indofood Sukses and Silver Scott

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

The idea behind Indofood Sukses Makmur and Silver Scott Mines 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.