Correlation Between Pabrik Kertas and Indocement Tunggal

Can any of the company-specific risk be diversified away by investing in both Pabrik Kertas and Indocement Tunggal 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 Pabrik Kertas and Indocement Tunggal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pabrik Kertas Tjiwi and Indocement Tunggal Prakarsa, you can compare the effects of market volatilities on Pabrik Kertas and Indocement Tunggal 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 Pabrik Kertas with a short position of Indocement Tunggal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pabrik Kertas and Indocement Tunggal.

Diversification Opportunities for Pabrik Kertas and Indocement Tunggal

0.32

Correlation Coefficient

Pabrik Kertas  Indocement Tunggal

Weak diversification

The 3 months correlation between Pabrik and Indocement is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Pabrik Kertas Tjiwi and Indocement Tunggal Prakarsa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indocement Tunggal and Pabrik Kertas 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 Pabrik Kertas Tjiwi are associated (or correlated) with Indocement Tunggal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indocement Tunggal has no effect on the direction of Pabrik Kertas i.e., Pabrik Kertas and Indocement Tunggal go up and down completely randomly.

Pair Corralation between Pabrik Kertas and Indocement Tunggal

Assuming the 90 days trading horizon Pabrik Kertas Tjiwi is expected to under-perform the Indocement Tunggal. In addition to that, Pabrik Kertas is 1.14 times more volatile than Indocement Tunggal Prakarsa. It trades about -0.1 of its total potential returns per unit of risk. Indocement Tunggal Prakarsa is currently generating about 0.06 per unit of volatility. If you would invest  682,500  in Indocement Tunggal Prakarsa on September 17, 2024 and sell it today you would earn a total of  37,500  from holding Indocement Tunggal Prakarsa or generate 5.49% return on investment over 90 days.

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

Pabrik Kertas Tjiwi  vs.  Indocement Tunggal Prakarsa

Pabrik Kertas Tjiwi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pabrik Kertas Tjiwi 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.

Indocement Tunggal

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Indocement Tunggal Prakarsa are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Indocement Tunggal is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Pabrik Kertas and Indocement Tunggal

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

The idea behind Pabrik Kertas Tjiwi and Indocement Tunggal Prakarsa 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.