Correlation Between Humpuss Intermoda and Bali Towerindo

Can any of the company-specific risk be diversified away by investing in both Humpuss Intermoda and Bali Towerindo 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 Humpuss Intermoda and Bali Towerindo into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Humpuss Intermoda Transportasi and Bali Towerindo Sentra, you can compare the effects of market volatilities on Humpuss Intermoda and Bali Towerindo 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 Humpuss Intermoda with a short position of Bali Towerindo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Humpuss Intermoda and Bali Towerindo.

Diversification Opportunities for Humpuss Intermoda and Bali Towerindo

0.91

Correlation Coefficient

Humpuss Intermoda  Bali Towerindo

Almost no diversification

The 3 months correlation between Humpuss and Bali is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Humpuss Intermoda Transportasi and Bali Towerindo Sentra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bali Towerindo Sentra and Humpuss Intermoda 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 Humpuss Intermoda Transportasi are associated (or correlated) with Bali Towerindo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bali Towerindo Sentra has no effect on the direction of Humpuss Intermoda i.e., Humpuss Intermoda and Bali Towerindo go up and down completely randomly.

Pair Corralation between Humpuss Intermoda and Bali Towerindo

Assuming the 90 days trading horizon Humpuss Intermoda is expected to generate 1.4 times less return on investment than Bali Towerindo. But when comparing it to its historical volatility, Humpuss Intermoda Transportasi is 1.02 times less risky than Bali Towerindo. It trades about 0.18 of its potential returns per unit of risk. Bali Towerindo Sentra is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  79,500  in Bali Towerindo Sentra on September 16, 2024 and sell it today you would earn a total of  58,500  from holding Bali Towerindo Sentra or generate 73.58% return on investment over 90 days.

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

Humpuss Intermoda Transportasi  vs.  Bali Towerindo Sentra

Humpuss Intermoda

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Humpuss Intermoda Transportasi are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Humpuss Intermoda disclosed solid returns over the last few months and may actually be approaching a breakup point.

Bali Towerindo Sentra

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bali Towerindo Sentra are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Bali Towerindo disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Humpuss Intermoda and Bali Towerindo

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

The idea behind Humpuss Intermoda Transportasi and Bali Towerindo Sentra 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.