Correlation Between Indofood Sukses and Danone SA
Can any of the company-specific risk be diversified away by investing in both Indofood Sukses and Danone SA 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 Danone SA 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 Danone SA, you can compare the effects of market volatilities on Indofood Sukses and Danone SA 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 Danone SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indofood Sukses and Danone SA.
Diversification Opportunities for Indofood Sukses and Danone SA
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Indofood and Danone is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Indofood Sukses Makmur and Danone SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danone SA 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 Danone SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danone SA has no effect on the direction of Indofood Sukses i.e., Indofood Sukses and Danone SA go up and down completely randomly.
Pair Corralation between Indofood Sukses and Danone SA
Assuming the 90 days horizon Indofood Sukses Makmur is expected to under-perform the Danone SA. In addition to that, Indofood Sukses is 1.35 times more volatile than Danone SA. It trades about -0.18 of its total potential returns per unit of risk. Danone SA is currently generating about -0.01 per unit of volatility. If you would invest 6,463 in Danone SA on January 24, 2024 and sell it today you would lose (38.00) from holding Danone SA or give up 0.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Indofood Sukses Makmur vs. Danone SA
Performance |
| Timeline |
| Indofood Sukses Makmur |
| Danone SA |
Indofood Sukses and Danone SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Indofood Sukses and Danone SA
The main advantage of trading using opposite Indofood Sukses and Danone SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indofood Sukses position performs unexpectedly, Danone SA 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 Danone SA will offset losses from the drop in Danone SA's long position.| Indofood Sukses vs. Kellanova | Indofood Sukses vs. Lancaster Colony | Indofood Sukses vs. The A2 Milk | Indofood Sukses vs. Artisan Consumer Goods |
| Danone SA vs. Kellanova | Danone SA vs. Lancaster Colony | Danone SA vs. The A2 Milk | Danone SA vs. Artisan Consumer Goods |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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