Correlation Between PT Ace and CIA ENGER

Can any of the company-specific risk be diversified away by investing in both PT Ace and CIA ENGER 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 PT Ace and CIA ENGER into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PT Ace Hardware and CIA ENGER ADR, you can compare the effects of market volatilities on PT Ace and CIA ENGER 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 PT Ace with a short position of CIA ENGER. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Ace and CIA ENGER.

Diversification Opportunities for PT Ace and CIA ENGER

-0.36

Correlation Coefficient

PT Ace  CIA ENGER

Very good diversification

The 3 months correlation between 4AH1 and CIA is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding PT Ace Hardware and CIA ENGER ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIA ENGER ADR and PT Ace 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 PT Ace Hardware are associated (or correlated) with CIA ENGER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIA ENGER ADR has no effect on the direction of PT Ace i.e., PT Ace and CIA ENGER go up and down completely randomly.

Pair Corralation between PT Ace and CIA ENGER

Assuming the 90 days trading horizon PT Ace Hardware is expected to generate 40.15 times more return on investment than CIA ENGER. However, PT Ace is 40.15 times more volatile than CIA ENGER ADR. It trades about 0.02 of its potential returns per unit of risk. CIA ENGER ADR is currently generating about 0.26 per unit of risk. If you would invest  4.05  in PT Ace Hardware on October 22, 2024 and sell it today you would lose (0.40) from holding PT Ace Hardware or give up 9.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.75%
Values	Daily Returns

PT Ace Hardware  vs.  CIA ENGER ADR

PT Ace Hardware

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Ace Hardware has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, PT Ace is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

CIA ENGER ADR

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CIA ENGER ADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, CIA ENGER is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PT Ace and CIA ENGER

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

The idea behind PT Ace Hardware and CIA ENGER ADR 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.