Correlation Between Trias Sentosa and Alumindo Light

Can any of the company-specific risk be diversified away by investing in both Trias Sentosa and Alumindo Light 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 Trias Sentosa and Alumindo Light into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Trias Sentosa Tbk and Alumindo Light Metal, you can compare the effects of market volatilities on Trias Sentosa and Alumindo Light 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 Trias Sentosa with a short position of Alumindo Light. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trias Sentosa and Alumindo Light.

Diversification Opportunities for Trias Sentosa and Alumindo Light

0.24

Correlation Coefficient

Trias Sentosa  Alumindo Light

Modest diversification

The 3 months correlation between Trias and Alumindo is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Trias Sentosa Tbk and Alumindo Light Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alumindo Light Metal and Trias Sentosa 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 Trias Sentosa Tbk are associated (or correlated) with Alumindo Light. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alumindo Light Metal has no effect on the direction of Trias Sentosa i.e., Trias Sentosa and Alumindo Light go up and down completely randomly.

Pair Corralation between Trias Sentosa and Alumindo Light

Assuming the 90 days trading horizon Trias Sentosa Tbk is expected to generate 0.44 times more return on investment than Alumindo Light. However, Trias Sentosa Tbk is 2.27 times less risky than Alumindo Light. It trades about -0.02 of its potential returns per unit of risk. Alumindo Light Metal is currently generating about -0.02 per unit of risk. If you would invest  49,800  in Trias Sentosa Tbk on September 25, 2024 and sell it today you would lose (400.00) from holding Trias Sentosa Tbk or give up 0.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.62%
Values	Daily Returns

Trias Sentosa Tbk  vs.  Alumindo Light Metal

Trias Sentosa Tbk

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Trias Sentosa Tbk are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Trias Sentosa is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Alumindo Light Metal

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alumindo Light Metal are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Alumindo Light may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Trias Sentosa and Alumindo Light

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

The idea behind Trias Sentosa Tbk and Alumindo Light Metal 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.