Correlation Between Barito Pacific and Pabrik Kertas

Can any of the company-specific risk be diversified away by investing in both Barito Pacific and Pabrik Kertas 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 Barito Pacific and Pabrik Kertas into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Barito Pacific Tbk and Pabrik Kertas Tjiwi, you can compare the effects of market volatilities on Barito Pacific and Pabrik Kertas 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 Barito Pacific with a short position of Pabrik Kertas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barito Pacific and Pabrik Kertas.

Diversification Opportunities for Barito Pacific and Pabrik Kertas

0.81

Correlation Coefficient

Barito Pacific  Pabrik Kertas

Very poor diversification

The 3 months correlation between Barito and Pabrik is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Barito Pacific Tbk and Pabrik Kertas Tjiwi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pabrik Kertas Tjiwi and Barito Pacific 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 Barito Pacific Tbk are associated (or correlated) with Pabrik Kertas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pabrik Kertas Tjiwi has no effect on the direction of Barito Pacific i.e., Barito Pacific and Pabrik Kertas go up and down completely randomly.

Pair Corralation between Barito Pacific and Pabrik Kertas

Assuming the 90 days trading horizon Barito Pacific Tbk is expected to under-perform the Pabrik Kertas. In addition to that, Barito Pacific is 1.54 times more volatile than Pabrik Kertas Tjiwi. It trades about -0.11 of its total potential returns per unit of risk. Pabrik Kertas Tjiwi is currently generating about -0.1 per unit of volatility. If you would invest  722,500  in Pabrik Kertas Tjiwi on September 16, 2024 and sell it today you would lose (90,000) from holding Pabrik Kertas Tjiwi or give up 12.46% of portfolio value over 90 days.

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

Barito Pacific Tbk  vs.  Pabrik Kertas Tjiwi

Barito Pacific Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Barito Pacific Tbk 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.

Pabrik Kertas Tjiwi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pabrik Kertas Tjiwi 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 Barito Pacific and Pabrik Kertas

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

The idea behind Barito Pacific Tbk and Pabrik Kertas Tjiwi 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.