Correlation Between Ultra Jaya and PT Indofood

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

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

Diversification Opportunities for Ultra Jaya and PT Indofood

-0.69

Correlation Coefficient

Ultra Jaya  PT Indofood

Excellent diversification

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

Pair Corralation between Ultra Jaya and PT Indofood

Assuming the 90 days trading horizon Ultra Jaya Milk is expected to under-perform the PT Indofood. In addition to that, Ultra Jaya is 1.36 times more volatile than PT Indofood Sukses. It trades about -0.01 of its total potential returns per unit of risk. PT Indofood Sukses is currently generating about 0.0 per unit of volatility. If you would invest  765,000  in PT Indofood Sukses on September 27, 2024 and sell it today you would lose (2,500) from holding PT Indofood Sukses or give up 0.33% of portfolio value over 90 days.

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

Ultra Jaya Milk  vs.  PT Indofood Sukses

Ultra Jaya Milk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ultra Jaya Milk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

PT Indofood Sukses

Risk-Adjusted Performance

5 of 100

Insignificant

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 quite conflicting forward-looking signals, PT Indofood may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ultra Jaya and PT Indofood

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

The idea behind Ultra Jaya Milk and PT Indofood Sukses 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.