Correlation Between Trans Power and Buana Listya

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

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

Diversification Opportunities for Trans Power and Buana Listya

0.75

Correlation Coefficient

Trans Power  Buana Listya

Poor diversification

The 3 months correlation between Trans and Buana is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Trans Power Marine 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 Trans Power 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 Trans Power Marine 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 Trans Power i.e., Trans Power and Buana Listya go up and down completely randomly.

Pair Corralation between Trans Power and Buana Listya

Assuming the 90 days trading horizon Trans Power Marine is expected to generate 0.7 times more return on investment than Buana Listya. However, Trans Power Marine is 1.43 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 -0.04 per unit of risk. If you would invest  68,000  in Trans Power Marine on September 3, 2024 and sell it today you would lose (4,000) from holding Trans Power Marine or give up 5.88% of portfolio value over 90 days.

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

Trans Power Marine  vs.  Buana Listya Tama

Trans Power Marine

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Trans Power Marine has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Trans Power is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Buana Listya Tama

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Buana Listya Tama 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 Trans Power and Buana Listya

The main advantage of trading using opposite Trans Power and Buana Listya positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trans Power 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 Trans Power Marine 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.

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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.