Correlation Between Alumindo Light and Pudjiadi Sons

Can any of the company-specific risk be diversified away by investing in both Alumindo Light and Pudjiadi Sons 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 Pudjiadi Sons 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 Pudjiadi Sons Tbk, you can compare the effects of market volatilities on Alumindo Light and Pudjiadi Sons 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 Pudjiadi Sons. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alumindo Light and Pudjiadi Sons.

Diversification Opportunities for Alumindo Light and Pudjiadi Sons

0.2

Correlation Coefficient

Alumindo Light  Pudjiadi Sons

Modest diversification

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

Pair Corralation between Alumindo Light and Pudjiadi Sons

If you would invest  88,000  in Pudjiadi Sons Tbk on September 14, 2024 and sell it today you would earn a total of  43,500  from holding Pudjiadi Sons Tbk or generate 49.43% return on investment over 90 days.

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

Alumindo Light Metal  vs.  Pudjiadi Sons Tbk

Alumindo Light Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alumindo Light Metal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Alumindo Light is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pudjiadi Sons Tbk

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pudjiadi Sons Tbk are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Pudjiadi Sons disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alumindo Light and Pudjiadi Sons

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

The idea behind Alumindo Light Metal and Pudjiadi Sons 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.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.