Correlation Between Armada Hflr and Kimia Farma

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

By analyzing existing cross correlation between Armada Hflr Pr and Kimia Farma Persero, you can compare the effects of market volatilities on Armada Hflr and Kimia Farma 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 Armada Hflr with a short position of Kimia Farma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Armada Hflr and Kimia Farma.

Diversification Opportunities for Armada Hflr and Kimia Farma

0.28

Correlation Coefficient

Armada Hflr  Kimia Farma

Modest diversification

The 3 months correlation between Armada and Kimia is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Armada Hflr Pr and Kimia Farma Persero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kimia Farma Persero and Armada Hflr 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 Armada Hflr Pr are associated (or correlated) with Kimia Farma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kimia Farma Persero has no effect on the direction of Armada Hflr i.e., Armada Hflr and Kimia Farma go up and down completely randomly.

Pair Corralation between Armada Hflr and Kimia Farma

Considering the 90-day investment horizon Armada Hflr Pr is expected to under-perform the Kimia Farma. But the stock apears to be less risky and, when comparing its historical volatility, Armada Hflr Pr is 2.88 times less risky than Kimia Farma. The stock trades about -0.03 of its potential returns per unit of risk. The Kimia Farma Persero is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  60,000  in Kimia Farma Persero on September 16, 2024 and sell it today you would earn a total of  3,500  from holding Kimia Farma Persero or generate 5.83% return on investment over 90 days.

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

Armada Hflr Pr  vs.  Kimia Farma Persero

Armada Hflr Pr

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Armada Hflr Pr has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Kimia Farma Persero

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kimia Farma Persero 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 forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Armada Hflr and Kimia Farma

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

The idea behind Armada Hflr Pr and Kimia Farma Persero 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.