Correlation Between Mastercard and Indofood Sukses

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Can any of the company-specific risk be diversified away by investing in both Mastercard and Indofood Sukses 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 Mastercard and Indofood Sukses into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mastercard and Indofood Sukses Makmur, you can compare the effects of market volatilities on Mastercard and Indofood Sukses 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 Mastercard with a short position of Indofood Sukses. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mastercard and Indofood Sukses.

Diversification Opportunities for Mastercard and Indofood Sukses

-0.17
  Correlation Coefficient

Good diversification

The 3 months correlation between Mastercard and Indofood is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard and Indofood Sukses Makmur in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indofood Sukses Makmur and Mastercard 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 Mastercard are associated (or correlated) with Indofood Sukses. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indofood Sukses Makmur has no effect on the direction of Mastercard i.e., Mastercard and Indofood Sukses go up and down completely randomly.

Pair Corralation between Mastercard and Indofood Sukses

Allowing for the 90-day total investment horizon Mastercard is expected to generate 0.45 times more return on investment than Indofood Sukses. However, Mastercard is 2.22 times less risky than Indofood Sukses. It trades about 0.12 of its potential returns per unit of risk. Indofood Sukses Makmur is currently generating about 0.01 per unit of risk. If you would invest  36,171  in Mastercard on December 30, 2023 and sell it today you would earn a total of  11,986  from holding Mastercard or generate 33.14% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Mastercard  vs.  Indofood Sukses Makmur

 Performance 
       Timeline  
Mastercard 

Risk-Adjusted Performance

18 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Mastercard sustained solid returns over the last few months and may actually be approaching a breakup point.
Indofood Sukses Makmur 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Indofood Sukses Makmur has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Indofood Sukses is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Mastercard and Indofood Sukses Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Mastercard and Indofood Sukses

The main advantage of trading using opposite Mastercard and Indofood Sukses positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mastercard position performs unexpectedly, Indofood Sukses 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 Indofood Sukses will offset losses from the drop in Indofood Sukses' long position.
The idea behind Mastercard and Indofood Sukses Makmur 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

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