Correlation Between National Beverage and PT Indosat

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

By analyzing existing cross correlation between National Beverage Corp and PT Indosat Tbk, you can compare the effects of market volatilities on National Beverage and PT Indosat 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 National Beverage with a short position of PT Indosat. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Beverage and PT Indosat.

Diversification Opportunities for National Beverage and PT Indosat

-0.07

Correlation Coefficient

National Beverage  PT Indosat

Good diversification

The 3 months correlation between National and IDO1 is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and PT Indosat Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Indosat Tbk and National Beverage 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 National Beverage Corp are associated (or correlated) with PT Indosat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Indosat Tbk has no effect on the direction of National Beverage i.e., National Beverage and PT Indosat go up and down completely randomly.

Pair Corralation between National Beverage and PT Indosat

Assuming the 90 days horizon National Beverage is expected to generate 19.63 times less return on investment than PT Indosat. But when comparing it to its historical volatility, National Beverage Corp is 6.45 times less risky than PT Indosat. It trades about 0.04 of its potential returns per unit of risk. PT Indosat Tbk is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  7.14  in PT Indosat Tbk on April 24, 2025 and sell it today you would earn a total of  3.86  from holding PT Indosat Tbk or generate 54.06% return on investment over 90 days.

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

National Beverage Corp  vs.  PT Indosat Tbk

National Beverage Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in National Beverage Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, National Beverage is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

PT Indosat Tbk

Risk-Adjusted Performance

OK

Over the last 90 days PT Indosat Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak basic indicators, PT Indosat reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Beverage and PT Indosat

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

The idea behind National Beverage Corp and PT Indosat Tbk 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.