Correlation Between Citra Borneo and Teladan Prima

Can any of the company-specific risk be diversified away by investing in both Citra Borneo and Teladan Prima 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 Citra Borneo and Teladan Prima into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Citra Borneo Utama and Teladan Prima Agro, you can compare the effects of market volatilities on Citra Borneo and Teladan Prima 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 Citra Borneo with a short position of Teladan Prima. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citra Borneo and Teladan Prima.

Diversification Opportunities for Citra Borneo and Teladan Prima

-0.56

Correlation Coefficient

Citra Borneo  Teladan Prima

Excellent diversification

The 3 months correlation between Citra and Teladan is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Citra Borneo Utama and Teladan Prima Agro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teladan Prima Agro and Citra Borneo 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 Citra Borneo Utama are associated (or correlated) with Teladan Prima. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teladan Prima Agro has no effect on the direction of Citra Borneo i.e., Citra Borneo and Teladan Prima go up and down completely randomly.

Pair Corralation between Citra Borneo and Teladan Prima

Assuming the 90 days trading horizon Citra Borneo Utama is expected to under-perform the Teladan Prima. But the stock apears to be less risky and, when comparing its historical volatility, Citra Borneo Utama is 1.17 times less risky than Teladan Prima. The stock trades about -0.17 of its potential returns per unit of risk. The Teladan Prima Agro is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  48,400  in Teladan Prima Agro on September 5, 2024 and sell it today you would earn a total of  3,600  from holding Teladan Prima Agro or generate 7.44% return on investment over 90 days.

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

Citra Borneo Utama  vs.  Teladan Prima Agro

Citra Borneo Utama

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Citra Borneo Utama 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.

Teladan Prima Agro

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Teladan Prima Agro are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Teladan Prima may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Citra Borneo and Teladan Prima

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

The idea behind Citra Borneo Utama and Teladan Prima Agro 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.