Correlation Between First Pacific and PT Indofood

Can any of the company-specific risk be diversified away by investing in both First Pacific and PT Indofood 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 First Pacific and PT Indofood into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First Pacific and PT Indofood Sukses, you can compare the effects of market volatilities on First Pacific and PT Indofood 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 First Pacific with a short position of PT Indofood. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Pacific and PT Indofood.

Diversification Opportunities for First Pacific and PT Indofood

-0.2

Correlation Coefficient

First Pacific  PT Indofood

Good diversification

The 3 months correlation between First and PIFMF is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding First Pacific and PT Indofood Sukses in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Indofood Sukses and First Pacific 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 First Pacific are associated (or correlated) with PT Indofood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Indofood Sukses has no effect on the direction of First Pacific i.e., First Pacific and PT Indofood go up and down completely randomly.

Pair Corralation between First Pacific and PT Indofood

Assuming the 90 days horizon First Pacific is expected to generate 1.38 times more return on investment than PT Indofood. However, First Pacific is 1.38 times more volatile than PT Indofood Sukses. It trades about 0.09 of its potential returns per unit of risk. PT Indofood Sukses is currently generating about -0.29 per unit of risk. If you would invest  45.00  in First Pacific on March 19, 2024 and sell it today you would earn a total of  2.00  from holding First Pacific or generate 4.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

First Pacific  vs.  PT Indofood Sukses

First Pacific

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Pacific are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting technical and fundamental indicators, First Pacific may actually be approaching a critical reversion point that can send shares even higher in July 2024.

PT Indofood Sukses

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Indofood Sukses has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with First Pacific and PT Indofood

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

The idea behind First Pacific and PT Indofood Sukses 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.