Correlation Between PT Ace and Singapore Reinsurance

Can any of the company-specific risk be diversified away by investing in both PT Ace and Singapore Reinsurance 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 Singapore Reinsurance 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 Singapore Reinsurance, you can compare the effects of market volatilities on PT Ace and Singapore Reinsurance 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 Singapore Reinsurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Ace and Singapore Reinsurance.

Diversification Opportunities for PT Ace and Singapore Reinsurance

-0.72

Correlation Coefficient

PT Ace  Singapore Reinsurance

Pay attention - limited upside

The 3 months correlation between 4AH1 and Singapore is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding PT Ace Hardware and Singapore Reinsurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Singapore Reinsurance 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 Singapore Reinsurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Singapore Reinsurance has no effect on the direction of PT Ace i.e., PT Ace and Singapore Reinsurance go up and down completely randomly.

Pair Corralation between PT Ace and Singapore Reinsurance

Assuming the 90 days trading horizon PT Ace Hardware is expected to generate 3.47 times more return on investment than Singapore Reinsurance. However, PT Ace is 3.47 times more volatile than Singapore Reinsurance. It trades about 0.05 of its potential returns per unit of risk. Singapore Reinsurance is currently generating about 0.01 per unit of risk. If you would invest  3.75  in PT Ace Hardware on September 27, 2024 and sell it today you would earn a total of  0.30  from holding PT Ace Hardware or generate 8.0% return on investment over 90 days.

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

PT Ace Hardware  vs.  Singapore Reinsurance

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.

Singapore Reinsurance

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Singapore Reinsurance are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Singapore Reinsurance unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Ace and Singapore Reinsurance

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

The idea behind PT Ace Hardware and Singapore Reinsurance 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.