Correlation Between BFI Finance and Lenox Pasifik

Can any of the company-specific risk be diversified away by investing in both BFI Finance and Lenox Pasifik 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 BFI Finance and Lenox Pasifik into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BFI Finance Indonesia and Lenox Pasifik Investama, you can compare the effects of market volatilities on BFI Finance and Lenox Pasifik 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 BFI Finance with a short position of Lenox Pasifik. Check out your portfolio center. Please also check ongoing floating volatility patterns of BFI Finance and Lenox Pasifik.

Diversification Opportunities for BFI Finance and Lenox Pasifik

-0.02

Correlation Coefficient

BFI Finance  Lenox Pasifik

Good diversification

The 3 months correlation between BFI and Lenox is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding BFI Finance Indonesia and Lenox Pasifik Investama in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lenox Pasifik Investama and BFI Finance 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 BFI Finance Indonesia are associated (or correlated) with Lenox Pasifik. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lenox Pasifik Investama has no effect on the direction of BFI Finance i.e., BFI Finance and Lenox Pasifik go up and down completely randomly.

Pair Corralation between BFI Finance and Lenox Pasifik

Assuming the 90 days trading horizon BFI Finance Indonesia is expected to generate 0.83 times more return on investment than Lenox Pasifik. However, BFI Finance Indonesia is 1.2 times less risky than Lenox Pasifik. It trades about 0.07 of its potential returns per unit of risk. Lenox Pasifik Investama is currently generating about -0.24 per unit of risk. If you would invest  88,289  in BFI Finance Indonesia on September 14, 2024 and sell it today you would earn a total of  3,211  from holding BFI Finance Indonesia or generate 3.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

BFI Finance Indonesia  vs.  Lenox Pasifik Investama

BFI Finance Indonesia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BFI Finance Indonesia 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.

Lenox Pasifik Investama

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lenox Pasifik Investama are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Lenox Pasifik disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BFI Finance and Lenox Pasifik

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

The idea behind BFI Finance Indonesia and Lenox Pasifik Investama 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.