Correlation Between Unilever Indonesia and Indonesia Fibreboard

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

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

Diversification Opportunities for Unilever Indonesia and Indonesia Fibreboard

-0.73

Correlation Coefficient

Unilever Indonesia  Indonesia Fibreboard

Pay attention - limited upside

The 3 months correlation between Unilever and Indonesia is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Unilever Indonesia Tbk and Indonesia Fibreboard Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indonesia Fibreboard and Unilever Indonesia 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 Unilever Indonesia Tbk are associated (or correlated) with Indonesia Fibreboard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indonesia Fibreboard has no effect on the direction of Unilever Indonesia i.e., Unilever Indonesia and Indonesia Fibreboard go up and down completely randomly.

Pair Corralation between Unilever Indonesia and Indonesia Fibreboard

Assuming the 90 days trading horizon Unilever Indonesia Tbk is expected to under-perform the Indonesia Fibreboard. In addition to that, Unilever Indonesia is 1.02 times more volatile than Indonesia Fibreboard Industry. It trades about -0.11 of its total potential returns per unit of risk. Indonesia Fibreboard Industry is currently generating about 0.05 per unit of volatility. If you would invest  18,534  in Indonesia Fibreboard Industry on September 19, 2024 and sell it today you would earn a total of  1,266  from holding Indonesia Fibreboard Industry or generate 6.83% return on investment over 90 days.

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

Unilever Indonesia Tbk  vs.  Indonesia Fibreboard Industry

Unilever Indonesia Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Unilever Indonesia Tbk 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.

Indonesia Fibreboard

Risk-Adjusted Performance

4 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Indonesia Fibreboard Industry are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Indonesia Fibreboard may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Unilever Indonesia and Indonesia Fibreboard

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

The idea behind Unilever Indonesia Tbk and Indonesia Fibreboard Industry 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.