Correlation Between Archi Indonesia and Widodo Makmur

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

By analyzing existing cross correlation between Archi Indonesia Tbk and Widodo Makmur Unggas, you can compare the effects of market volatilities on Archi Indonesia and Widodo Makmur 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 Archi Indonesia with a short position of Widodo Makmur. Check out your portfolio center. Please also check ongoing floating volatility patterns of Archi Indonesia and Widodo Makmur.

Diversification Opportunities for Archi Indonesia and Widodo Makmur

0.45

Correlation Coefficient

Archi Indonesia  Widodo Makmur

Very weak diversification

The 3 months correlation between Archi and Widodo is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Archi Indonesia Tbk and Widodo Makmur Unggas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Widodo Makmur Unggas and Archi Indonesia 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 Archi Indonesia Tbk are associated (or correlated) with Widodo Makmur. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Widodo Makmur Unggas has no effect on the direction of Archi Indonesia i.e., Archi Indonesia and Widodo Makmur go up and down completely randomly.

Pair Corralation between Archi Indonesia and Widodo Makmur

Assuming the 90 days trading horizon Archi Indonesia Tbk is expected to generate 0.38 times more return on investment than Widodo Makmur. However, Archi Indonesia Tbk is 2.63 times less risky than Widodo Makmur. It trades about -0.06 of its potential returns per unit of risk. Widodo Makmur Unggas is currently generating about -0.03 per unit of risk. If you would invest  28,400  in Archi Indonesia Tbk on September 19, 2024 and sell it today you would lose (2,600) from holding Archi Indonesia Tbk or give up 9.15% of portfolio value over 90 days.

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

Archi Indonesia Tbk  vs.  Widodo Makmur Unggas

Archi Indonesia Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Archi Indonesia Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Widodo Makmur Unggas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Widodo Makmur Unggas has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Archi Indonesia and Widodo Makmur

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

The idea behind Archi Indonesia Tbk and Widodo Makmur Unggas 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.