Correlation Between Indofood Sukses and CVS Health
Can any of the company-specific risk be diversified away by investing in both Indofood Sukses and CVS Health 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 Sukses and CVS Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Indofood Sukses Makmur and CVS Health Corp, you can compare the effects of market volatilities on Indofood Sukses and CVS Health 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 Sukses with a short position of CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indofood Sukses and CVS Health.
Diversification Opportunities for Indofood Sukses and CVS Health
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Indofood and CVS is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Indofood Sukses Makmur and CVS Health Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health Corp and Indofood Sukses 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 Sukses Makmur are associated (or correlated) with CVS Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVS Health Corp has no effect on the direction of Indofood Sukses i.e., Indofood Sukses and CVS Health go up and down completely randomly.
Pair Corralation between Indofood Sukses and CVS Health
Assuming the 90 days horizon Indofood Sukses Makmur is expected to generate 0.54 times more return on investment than CVS Health. However, Indofood Sukses Makmur is 1.84 times less risky than CVS Health. It trades about -0.01 of its potential returns per unit of risk. CVS Health Corp is currently generating about -0.33 per unit of risk. If you would invest 2,000 in Indofood Sukses Makmur on February 6, 2024 and sell it today you would lose (19.85) from holding Indofood Sukses Makmur or give up 0.99% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Indofood Sukses Makmur vs. CVS Health Corp
Performance |
| Timeline |
| Indofood Sukses Makmur |
| CVS Health Corp |
Indofood Sukses and CVS Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Indofood Sukses and CVS Health
The main advantage of trading using opposite Indofood Sukses and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indofood Sukses position performs unexpectedly, CVS Health 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 CVS Health will offset losses from the drop in CVS Health's long position.| Indofood Sukses vs. Bank Mandiri Persero | Indofood Sukses vs. Astra International Tbk | Indofood Sukses vs. United Tractors Tbk |
| CVS Health vs. Humana Inc | CVS Health vs. Cigna Corp | CVS Health vs. Elevance Health | CVS Health vs. Centene Corp |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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