Correlation Between INDOFOOD AGRI and AeroVironment

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

By analyzing existing cross correlation between INDOFOOD AGRI RES and AeroVironment, you can compare the effects of market volatilities on INDOFOOD AGRI and AeroVironment 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 AGRI with a short position of AeroVironment. Check out your portfolio center. Please also check ongoing floating volatility patterns of INDOFOOD AGRI and AeroVironment.

Diversification Opportunities for INDOFOOD AGRI and AeroVironment

0.31

Correlation Coefficient

INDOFOOD AGRI  AeroVironment

Weak diversification

The 3 months correlation between INDOFOOD and AeroVironment is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding INDOFOOD AGRI RES and AeroVironment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AeroVironment and INDOFOOD AGRI 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 AGRI RES are associated (or correlated) with AeroVironment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AeroVironment has no effect on the direction of INDOFOOD AGRI i.e., INDOFOOD AGRI and AeroVironment go up and down completely randomly.

Pair Corralation between INDOFOOD AGRI and AeroVironment

Assuming the 90 days trading horizon INDOFOOD AGRI is expected to generate 5.42 times less return on investment than AeroVironment. But when comparing it to its historical volatility, INDOFOOD AGRI RES is 2.1 times less risky than AeroVironment. It trades about 0.08 of its potential returns per unit of risk. AeroVironment is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  13,150  in AeroVironment on April 25, 2025 and sell it today you would earn a total of  9,230  from holding AeroVironment or generate 70.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

INDOFOOD AGRI RES  vs.  AeroVironment

INDOFOOD AGRI RES

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in INDOFOOD AGRI RES are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, INDOFOOD AGRI may actually be approaching a critical reversion point that can send shares even higher in August 2025.

AeroVironment

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AeroVironment are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AeroVironment reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with INDOFOOD AGRI and AeroVironment

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

The idea behind INDOFOOD AGRI RES and AeroVironment 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.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.