Correlation Between Timah Persero and Chandra Asri

Can any of the company-specific risk be diversified away by investing in both Timah Persero and Chandra Asri 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 Timah Persero and Chandra Asri into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Timah Persero Tbk and Chandra Asri Petrochemical, you can compare the effects of market volatilities on Timah Persero and Chandra Asri 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 Timah Persero with a short position of Chandra Asri. Check out your portfolio center. Please also check ongoing floating volatility patterns of Timah Persero and Chandra Asri.

Diversification Opportunities for Timah Persero and Chandra Asri

-0.48

Correlation Coefficient

Timah Persero  Chandra Asri

Very good diversification

The 3 months correlation between Timah and Chandra is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Timah Persero Tbk and Chandra Asri Petrochemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chandra Asri Petroch and Timah Persero 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 Timah Persero Tbk are associated (or correlated) with Chandra Asri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chandra Asri Petroch has no effect on the direction of Timah Persero i.e., Timah Persero and Chandra Asri go up and down completely randomly.

Pair Corralation between Timah Persero and Chandra Asri

Assuming the 90 days trading horizon Timah Persero Tbk is expected to generate 0.91 times more return on investment than Chandra Asri. However, Timah Persero Tbk is 1.1 times less risky than Chandra Asri. It trades about 0.07 of its potential returns per unit of risk. Chandra Asri Petrochemical is currently generating about -0.12 per unit of risk. If you would invest  100,500  in Timah Persero Tbk on September 3, 2024 and sell it today you would earn a total of  11,500  from holding Timah Persero Tbk or generate 11.44% return on investment over 90 days.

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

Timah Persero Tbk  vs.  Chandra Asri Petrochemical

Timah Persero Tbk

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Timah Persero Tbk are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Timah Persero disclosed solid returns over the last few months and may actually be approaching a breakup point.

Chandra Asri Petroch

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chandra Asri Petrochemical 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.

Pair Trading with Timah Persero and Chandra Asri

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

The idea behind Timah Persero Tbk and Chandra Asri Petrochemical 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.