Correlation Between Indofood Sukses and Akasha Wira

Can any of the company-specific risk be diversified away by investing in both Indofood Sukses and Akasha Wira 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 Akasha Wira 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 Akasha Wira International, you can compare the effects of market volatilities on Indofood Sukses and Akasha Wira 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 Akasha Wira. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indofood Sukses and Akasha Wira.

Diversification Opportunities for Indofood Sukses and Akasha Wira

0.62

Correlation Coefficient

Indofood Sukses  Akasha Wira

Poor diversification

The 3 months correlation between Indofood and Akasha is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Indofood Sukses Makmur and Akasha Wira International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Akasha Wira International 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 Akasha Wira. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Akasha Wira International has no effect on the direction of Indofood Sukses i.e., Indofood Sukses and Akasha Wira go up and down completely randomly.

Pair Corralation between Indofood Sukses and Akasha Wira

Assuming the 90 days trading horizon Indofood Sukses Makmur is expected to under-perform the Akasha Wira. But the stock apears to be less risky and, when comparing its historical volatility, Indofood Sukses Makmur is 2.33 times less risky than Akasha Wira. The stock trades about -0.01 of its potential returns per unit of risk. The Akasha Wira International is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,032,500  in Akasha Wira International on February 2, 2024 and sell it today you would lose (22,500) from holding Akasha Wira International or give up 2.18% 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.  Akasha Wira International

Indofood Sukses Makmur

Risk-Adjusted Performance

0 of 100

Very Weak

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

Akasha Wira International

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Akasha Wira International are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Akasha Wira disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Indofood Sukses and Akasha Wira

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

The idea behind Indofood Sukses Makmur and Akasha Wira International 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.