Correlation Between Alumindo Light and Inocycle Technology

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

By analyzing existing cross correlation between Alumindo Light Metal and Inocycle Technology Tbk, you can compare the effects of market volatilities on Alumindo Light and Inocycle Technology 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 Alumindo Light with a short position of Inocycle Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alumindo Light and Inocycle Technology.

Diversification Opportunities for Alumindo Light and Inocycle Technology

0.6

Correlation Coefficient

Alumindo Light  Inocycle Technology

Poor diversification

The 3 months correlation between Alumindo and Inocycle is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Alumindo Light Metal and Inocycle Technology Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inocycle Technology Tbk and Alumindo Light 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 Alumindo Light Metal are associated (or correlated) with Inocycle Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inocycle Technology Tbk has no effect on the direction of Alumindo Light i.e., Alumindo Light and Inocycle Technology go up and down completely randomly.

Pair Corralation between Alumindo Light and Inocycle Technology

Assuming the 90 days trading horizon Alumindo Light Metal is expected to generate 1.06 times more return on investment than Inocycle Technology. However, Alumindo Light is 1.06 times more volatile than Inocycle Technology Tbk. It trades about 0.08 of its potential returns per unit of risk. Inocycle Technology Tbk is currently generating about 0.04 per unit of risk. If you would invest  6,600  in Alumindo Light Metal on September 19, 2024 and sell it today you would earn a total of  800.00  from holding Alumindo Light Metal or generate 12.12% return on investment over 90 days.

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

Alumindo Light Metal  vs.  Inocycle Technology Tbk

Alumindo Light Metal

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alumindo Light Metal are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Alumindo Light disclosed solid returns over the last few months and may actually be approaching a breakup point.

Inocycle Technology Tbk

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Inocycle Technology Tbk are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Inocycle Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Alumindo Light and Inocycle Technology

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

The idea behind Alumindo Light Metal and Inocycle Technology 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.