Correlation Between Indonesia Fibreboard and Gunung Raja

Can any of the company-specific risk be diversified away by investing in both Indonesia Fibreboard and Gunung Raja 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 Indonesia Fibreboard and Gunung Raja into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Indonesia Fibreboard Industry and Gunung Raja Paksi, you can compare the effects of market volatilities on Indonesia Fibreboard and Gunung Raja 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 Indonesia Fibreboard with a short position of Gunung Raja. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indonesia Fibreboard and Gunung Raja.

Diversification Opportunities for Indonesia Fibreboard and Gunung Raja

-0.24

Correlation Coefficient

Indonesia Fibreboard  Gunung Raja

Very good diversification

The 3 months correlation between Indonesia and Gunung is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Indonesia Fibreboard Industry and Gunung Raja Paksi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gunung Raja Paksi and Indonesia Fibreboard 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 Indonesia Fibreboard Industry are associated (or correlated) with Gunung Raja. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gunung Raja Paksi has no effect on the direction of Indonesia Fibreboard i.e., Indonesia Fibreboard and Gunung Raja go up and down completely randomly.

Pair Corralation between Indonesia Fibreboard and Gunung Raja

Assuming the 90 days trading horizon Indonesia Fibreboard is expected to generate 3.99 times less return on investment than Gunung Raja. But when comparing it to its historical volatility, Indonesia Fibreboard Industry is 3.89 times less risky than Gunung Raja. It trades about 0.06 of its potential returns per unit of risk. Gunung Raja Paksi is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  18,647  in Gunung Raja Paksi on September 19, 2024 and sell it today you would earn a total of  9,153  from holding Gunung Raja Paksi or generate 49.09% return on investment over 90 days.

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

Indonesia Fibreboard Industry  vs.  Gunung Raja Paksi

Indonesia Fibreboard

Risk-Adjusted Performance

4 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Indonesia Fibreboard Industry are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Indonesia Fibreboard may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Gunung Raja Paksi

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Indonesia Fibreboard and Gunung Raja

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

The idea behind Indonesia Fibreboard Industry and Gunung Raja Paksi 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.