Correlation Between FKS Food and Wilmar Cahaya

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

By analyzing existing cross correlation between FKS Food Sejahtera and Wilmar Cahaya Indonesia, you can compare the effects of market volatilities on FKS Food and Wilmar Cahaya 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 FKS Food with a short position of Wilmar Cahaya. Check out your portfolio center. Please also check ongoing floating volatility patterns of FKS Food and Wilmar Cahaya.

Diversification Opportunities for FKS Food and Wilmar Cahaya

0.32

Correlation Coefficient

FKS Food  Wilmar Cahaya

Weak diversification

The 3 months correlation between FKS and Wilmar is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding FKS Food Sejahtera and Wilmar Cahaya Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wilmar Cahaya Indonesia and FKS Food 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 FKS Food Sejahtera are associated (or correlated) with Wilmar Cahaya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wilmar Cahaya Indonesia has no effect on the direction of FKS Food i.e., FKS Food and Wilmar Cahaya go up and down completely randomly.

Pair Corralation between FKS Food and Wilmar Cahaya

Assuming the 90 days trading horizon FKS Food Sejahtera is expected to under-perform the Wilmar Cahaya. But the stock apears to be less risky and, when comparing its historical volatility, FKS Food Sejahtera is 1.24 times less risky than Wilmar Cahaya. The stock trades about -0.38 of its potential returns per unit of risk. The Wilmar Cahaya Indonesia is currently generating about -0.26 of returns per unit of risk over similar time horizon. If you would invest  219,000  in Wilmar Cahaya Indonesia on August 29, 2024 and sell it today you would lose (16,000) from holding Wilmar Cahaya Indonesia or give up 7.31% of portfolio value over 90 days.

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

FKS Food Sejahtera  vs.  Wilmar Cahaya Indonesia

FKS Food Sejahtera

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FKS Food Sejahtera has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Wilmar Cahaya Indonesia

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wilmar Cahaya Indonesia are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Wilmar Cahaya may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with FKS Food and Wilmar Cahaya

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

The idea behind FKS Food Sejahtera and Wilmar Cahaya Indonesia 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..