Correlation Between Widodo Makmur and Archi Indonesia

Can any of the company-specific risk be diversified away by investing in both Widodo Makmur and Archi Indonesia 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 Widodo Makmur and Archi Indonesia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Widodo Makmur Unggas and Archi Indonesia Tbk, you can compare the effects of market volatilities on Widodo Makmur and Archi Indonesia 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 Widodo Makmur with a short position of Archi Indonesia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Widodo Makmur and Archi Indonesia.

Diversification Opportunities for Widodo Makmur and Archi Indonesia

0.45

Correlation Coefficient

Widodo Makmur  Archi Indonesia

Very weak diversification

The 3 months correlation between Widodo and Archi is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Widodo Makmur Unggas and Archi Indonesia Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archi Indonesia Tbk and Widodo Makmur 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 Widodo Makmur Unggas are associated (or correlated) with Archi Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Archi Indonesia Tbk has no effect on the direction of Widodo Makmur i.e., Widodo Makmur and Archi Indonesia go up and down completely randomly.

Pair Corralation between Widodo Makmur and Archi Indonesia

Assuming the 90 days trading horizon Widodo Makmur Unggas is expected to under-perform the Archi Indonesia. In addition to that, Widodo Makmur is 1.7 times more volatile than Archi Indonesia Tbk. It trades about -0.08 of its total potential returns per unit of risk. Archi Indonesia Tbk is currently generating about -0.01 per unit of volatility. If you would invest  33,200  in Archi Indonesia Tbk on September 19, 2024 and sell it today you would lose (7,400) from holding Archi Indonesia Tbk or give up 22.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.79%
Values	Daily Returns

Widodo Makmur Unggas  vs.  Archi Indonesia Tbk

Widodo Makmur Unggas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Widodo Makmur Unggas 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.

Archi Indonesia Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Archi Indonesia Tbk 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 Widodo Makmur and Archi Indonesia

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

The idea behind Widodo Makmur Unggas and Archi Indonesia Tbk 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.