Correlation Between Pan Brothers and Asia Pacific

Can any of the company-specific risk be diversified away by investing in both Pan Brothers and Asia Pacific 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 Pan Brothers and Asia Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pan Brothers Tbk and Asia Pacific Investama, you can compare the effects of market volatilities on Pan Brothers and Asia Pacific 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 Pan Brothers with a short position of Asia Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pan Brothers and Asia Pacific.

Diversification Opportunities for Pan Brothers and Asia Pacific

0.06

Correlation Coefficient

Pan Brothers  Asia Pacific

Significant diversification

The 3 months correlation between Pan and Asia is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Pan Brothers Tbk and Asia Pacific Investama in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Pacific Investama and Pan Brothers 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 Pan Brothers Tbk are associated (or correlated) with Asia Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Pacific Investama has no effect on the direction of Pan Brothers i.e., Pan Brothers and Asia Pacific go up and down completely randomly.

Pair Corralation between Pan Brothers and Asia Pacific

Assuming the 90 days trading horizon Pan Brothers is expected to generate 1.83 times less return on investment than Asia Pacific. But when comparing it to its historical volatility, Pan Brothers Tbk is 1.1 times less risky than Asia Pacific. It trades about 0.06 of its potential returns per unit of risk. Asia Pacific Investama is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3,000  in Asia Pacific Investama on September 3, 2024 and sell it today you would earn a total of  600.00  from holding Asia Pacific Investama or generate 20.0% return on investment over 90 days.

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

Pan Brothers Tbk  vs.  Asia Pacific Investama

Pan Brothers Tbk

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pan Brothers Tbk are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Pan Brothers may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Asia Pacific Investama

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Asia Pacific Investama are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Asia Pacific disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pan Brothers and Asia Pacific

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

The idea behind Pan Brothers Tbk and Asia Pacific Investama 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.