Correlation Between Bintang Mitra and Alkindo Naratama

Can any of the company-specific risk be diversified away by investing in both Bintang Mitra and Alkindo Naratama 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 Bintang Mitra and Alkindo Naratama into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bintang Mitra Semestaraya and Alkindo Naratama Tbk, you can compare the effects of market volatilities on Bintang Mitra and Alkindo Naratama 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 Bintang Mitra with a short position of Alkindo Naratama. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bintang Mitra and Alkindo Naratama.

Diversification Opportunities for Bintang Mitra and Alkindo Naratama

-0.3

Correlation Coefficient

Bintang Mitra  Alkindo Naratama

Very good diversification

The 3 months correlation between Bintang and Alkindo is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Bintang Mitra Semestaraya and Alkindo Naratama Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alkindo Naratama Tbk and Bintang Mitra 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 Bintang Mitra Semestaraya are associated (or correlated) with Alkindo Naratama. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alkindo Naratama Tbk has no effect on the direction of Bintang Mitra i.e., Bintang Mitra and Alkindo Naratama go up and down completely randomly.

Pair Corralation between Bintang Mitra and Alkindo Naratama

Assuming the 90 days trading horizon Bintang Mitra Semestaraya is expected to under-perform the Alkindo Naratama. But the stock apears to be less risky and, when comparing its historical volatility, Bintang Mitra Semestaraya is 2.12 times less risky than Alkindo Naratama. The stock trades about -0.04 of its potential returns per unit of risk. The Alkindo Naratama Tbk is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  41,800  in Alkindo Naratama Tbk on September 13, 2024 and sell it today you would earn a total of  12,200  from holding Alkindo Naratama Tbk or generate 29.19% return on investment over 90 days.

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

Bintang Mitra Semestaraya  vs.  Alkindo Naratama Tbk

Bintang Mitra Semestaraya

Risk-Adjusted Performance

0 of 100

Very Weak

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

Alkindo Naratama Tbk

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alkindo Naratama Tbk are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Alkindo Naratama disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bintang Mitra and Alkindo Naratama

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

The idea behind Bintang Mitra Semestaraya and Alkindo Naratama 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.