Correlation Between INDOFOOD AGRI and Newmont

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

By analyzing existing cross correlation between INDOFOOD AGRI RES and Newmont, you can compare the effects of market volatilities on INDOFOOD AGRI and Newmont 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 AGRI with a short position of Newmont. Check out your portfolio center. Please also check ongoing floating volatility patterns of INDOFOOD AGRI and Newmont.

Diversification Opportunities for INDOFOOD AGRI and Newmont

-0.38

Correlation Coefficient

INDOFOOD AGRI  Newmont

Very good diversification

The 3 months correlation between INDOFOOD and Newmont is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding INDOFOOD AGRI RES and Newmont in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newmont and INDOFOOD AGRI 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 AGRI RES are associated (or correlated) with Newmont. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newmont has no effect on the direction of INDOFOOD AGRI i.e., INDOFOOD AGRI and Newmont go up and down completely randomly.

Pair Corralation between INDOFOOD AGRI and Newmont

Assuming the 90 days trading horizon INDOFOOD AGRI RES is expected to generate 0.81 times more return on investment than Newmont. However, INDOFOOD AGRI RES is 1.24 times less risky than Newmont. It trades about 0.04 of its potential returns per unit of risk. Newmont is currently generating about -0.11 per unit of risk. If you would invest  21.00  in INDOFOOD AGRI RES on September 13, 2024 and sell it today you would earn a total of  1.00  from holding INDOFOOD AGRI RES or generate 4.76% return on investment over 90 days.

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

INDOFOOD AGRI RES  vs.  Newmont

INDOFOOD AGRI RES

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in INDOFOOD AGRI RES are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, INDOFOOD AGRI is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Newmont

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Newmont has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with INDOFOOD AGRI and Newmont

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

The idea behind INDOFOOD AGRI RES and Newmont 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.