Correlation Between PT Indonesia and Buana Listya

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

By analyzing existing cross correlation between PT Indonesia Kendaraan and Buana Listya Tama, you can compare the effects of market volatilities on PT Indonesia and Buana Listya 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 PT Indonesia with a short position of Buana Listya. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Indonesia and Buana Listya.

Diversification Opportunities for PT Indonesia and Buana Listya

-0.69

Correlation Coefficient

PT Indonesia  Buana Listya

Excellent diversification

The 3 months correlation between IPCC and Buana is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding PT Indonesia Kendaraan and Buana Listya Tama in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Buana Listya Tama and PT Indonesia 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 PT Indonesia Kendaraan are associated (or correlated) with Buana Listya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Buana Listya Tama has no effect on the direction of PT Indonesia i.e., PT Indonesia and Buana Listya go up and down completely randomly.

Pair Corralation between PT Indonesia and Buana Listya

Assuming the 90 days trading horizon PT Indonesia is expected to generate 10.38 times less return on investment than Buana Listya. But when comparing it to its historical volatility, PT Indonesia Kendaraan is 1.09 times less risky than Buana Listya. It trades about 0.03 of its potential returns per unit of risk. Buana Listya Tama is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  11,100  in Buana Listya Tama on September 15, 2024 and sell it today you would earn a total of  1,200  from holding Buana Listya Tama or generate 10.81% return on investment over 90 days.

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

PT Indonesia Kendaraan  vs.  Buana Listya Tama

PT Indonesia Kendaraan

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PT Indonesia Kendaraan are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, PT Indonesia may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Buana Listya Tama

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Buana Listya Tama are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Buana Listya may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PT Indonesia and Buana Listya

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

The idea behind PT Indonesia Kendaraan and Buana Listya Tama 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.