Correlation Between Optima Prima and Bekasi Fajar

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

By analyzing existing cross correlation between Optima Prima Metal and Bekasi Fajar Industrial, you can compare the effects of market volatilities on Optima Prima and Bekasi Fajar 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 Optima Prima with a short position of Bekasi Fajar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Optima Prima and Bekasi Fajar.

Diversification Opportunities for Optima Prima and Bekasi Fajar

0.88

Correlation Coefficient

Optima Prima  Bekasi Fajar

Very poor diversification

The 3 months correlation between Optima and Bekasi is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Optima Prima Metal and Bekasi Fajar Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bekasi Fajar Industrial and Optima Prima 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 Optima Prima Metal are associated (or correlated) with Bekasi Fajar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bekasi Fajar Industrial has no effect on the direction of Optima Prima i.e., Optima Prima and Bekasi Fajar go up and down completely randomly.

Pair Corralation between Optima Prima and Bekasi Fajar

Assuming the 90 days trading horizon Optima Prima Metal is expected to under-perform the Bekasi Fajar. In addition to that, Optima Prima is 1.74 times more volatile than Bekasi Fajar Industrial. It trades about -0.27 of its total potential returns per unit of risk. Bekasi Fajar Industrial is currently generating about -0.09 per unit of volatility. If you would invest  12,600  in Bekasi Fajar Industrial on September 13, 2024 and sell it today you would lose (1,600) from holding Bekasi Fajar Industrial or give up 12.7% of portfolio value over 90 days.

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

Optima Prima Metal  vs.  Bekasi Fajar Industrial

Optima Prima Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Optima Prima Metal 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.

Bekasi Fajar Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bekasi Fajar Industrial 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 Optima Prima and Bekasi Fajar

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

The idea behind Optima Prima Metal and Bekasi Fajar Industrial 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .