Correlation Between Indofood Cbp and Optima Prima

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

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

Diversification Opportunities for Indofood Cbp and Optima Prima

-0.37

Correlation Coefficient

Indofood Cbp  Optima Prima

Very good diversification

The 3 months correlation between Indofood and Optima is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Indofood Cbp Sukses and Optima Prima Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optima Prima Metal and Indofood Cbp 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 Cbp Sukses are associated (or correlated) with Optima Prima. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optima Prima Metal has no effect on the direction of Indofood Cbp i.e., Indofood Cbp and Optima Prima go up and down completely randomly.

Pair Corralation between Indofood Cbp and Optima Prima

Assuming the 90 days trading horizon Indofood Cbp Sukses is expected to under-perform the Optima Prima. In addition to that, Indofood Cbp is 2.05 times more volatile than Optima Prima Metal. It trades about -0.11 of its total potential returns per unit of risk. Optima Prima Metal is currently generating about 0.1 per unit of volatility. If you would invest  5,300  in Optima Prima Metal on January 30, 2024 and sell it today you would earn a total of  100.00  from holding Optima Prima Metal or generate 1.89% return on investment over 90 days.

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

Indofood Cbp Sukses  vs.  Optima Prima Metal

Indofood Cbp Sukses

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indofood Cbp Sukses has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Indofood Cbp is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Optima Prima Metal

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Optima Prima Metal are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Optima Prima is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Indofood Cbp and Optima Prima

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

The idea behind Indofood Cbp Sukses and Optima Prima Metal 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.