Correlation Between INDOFOOD AGRI and ATT

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

Diversification Opportunities for INDOFOOD AGRI and ATT

0.62

Correlation Coefficient

INDOFOOD AGRI  ATT

Poor diversification

The 3 months correlation between INDOFOOD and ATT is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding INDOFOOD AGRI RES and ATT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATT Inc 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 ATT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATT Inc has no effect on the direction of INDOFOOD AGRI i.e., INDOFOOD AGRI and ATT go up and down completely randomly.

Pair Corralation between INDOFOOD AGRI and ATT

Assuming the 90 days trading horizon INDOFOOD AGRI is expected to generate 2.44 times less return on investment than ATT. In addition to that, INDOFOOD AGRI is 1.87 times more volatile than ATT Inc. It trades about 0.04 of its total potential returns per unit of risk. ATT Inc is currently generating about 0.2 per unit of volatility. If you would invest  1,942  in ATT Inc on September 17, 2024 and sell it today you would earn a total of  299.00  from holding ATT Inc or generate 15.4% return on investment over 90 days.

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

INDOFOOD AGRI RES  vs.  ATT Inc

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.

ATT Inc

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, ATT exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with INDOFOOD AGRI and ATT

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

The idea behind INDOFOOD AGRI RES and ATT Inc 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.