Correlation Between Avia Avian and Cemindo Gemilang

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

By analyzing existing cross correlation between Avia Avian PT and Cemindo Gemilang Tbk, you can compare the effects of market volatilities on Avia Avian and Cemindo Gemilang 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 Avia Avian with a short position of Cemindo Gemilang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avia Avian and Cemindo Gemilang.

Diversification Opportunities for Avia Avian and Cemindo Gemilang

0.12

Correlation Coefficient

Avia Avian  Cemindo Gemilang

Average diversification

The 3 months correlation between Avia and Cemindo is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Avia Avian PT and Cemindo Gemilang Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cemindo Gemilang Tbk and Avia Avian 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 Avia Avian PT are associated (or correlated) with Cemindo Gemilang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cemindo Gemilang Tbk has no effect on the direction of Avia Avian i.e., Avia Avian and Cemindo Gemilang go up and down completely randomly.

Pair Corralation between Avia Avian and Cemindo Gemilang

Assuming the 90 days trading horizon Avia Avian PT is expected to under-perform the Cemindo Gemilang. But the stock apears to be less risky and, when comparing its historical volatility, Avia Avian PT is 1.09 times less risky than Cemindo Gemilang. The stock trades about -0.11 of its potential returns per unit of risk. The Cemindo Gemilang Tbk is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  103,000  in Cemindo Gemilang Tbk on September 16, 2024 and sell it today you would lose (5,000) from holding Cemindo Gemilang Tbk or give up 4.85% of portfolio value over 90 days.

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

Avia Avian PT  vs.  Cemindo Gemilang Tbk

Avia Avian PT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avia Avian PT 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.

Cemindo Gemilang Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Avia Avian and Cemindo Gemilang

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

The idea behind Avia Avian PT and Cemindo Gemilang 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.