Correlation Between Indofood Sukses and Tytan Holdings

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

Diversification Opportunities for Indofood Sukses and Tytan Holdings

-0.39

Correlation Coefficient

Indofood Sukses  Tytan Holdings

Very good diversification

The 3 months correlation between Indofood and Tytan is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Indofood Sukses Makmur and Tytan Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tytan Holdings 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 Tytan Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tytan Holdings has no effect on the direction of Indofood Sukses i.e., Indofood Sukses and Tytan Holdings go up and down completely randomly.

Pair Corralation between Indofood Sukses and Tytan Holdings

Assuming the 90 days horizon Indofood Sukses Makmur is expected to generate 0.36 times more return on investment than Tytan Holdings. However, Indofood Sukses Makmur is 2.8 times less risky than Tytan Holdings. It trades about 0.03 of its potential returns per unit of risk. Tytan Holdings is currently generating about -0.12 per unit of risk. If you would invest  2,210  in Indofood Sukses Makmur on September 29, 2024 and sell it today you would earn a total of  75.00  from holding Indofood Sukses Makmur or generate 3.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.92%
Values	Daily Returns

Indofood Sukses Makmur  vs.  Tytan Holdings

Indofood Sukses Makmur

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Indofood Sukses Makmur are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Indofood Sukses may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Tytan Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tytan Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Indofood Sukses and Tytan Holdings

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

The idea behind Indofood Sukses Makmur and Tytan Holdings 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..