Correlation Between CB Industrial and Tambun Indah

Can any of the company-specific risk be diversified away by investing in both CB Industrial and Tambun Indah 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 CB Industrial and Tambun Indah into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CB Industrial Product and Tambun Indah Land, you can compare the effects of market volatilities on CB Industrial and Tambun Indah 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 CB Industrial with a short position of Tambun Indah. Check out your portfolio center. Please also check ongoing floating volatility patterns of CB Industrial and Tambun Indah.

Diversification Opportunities for CB Industrial and Tambun Indah

-0.26

Correlation Coefficient

CB Industrial  Tambun Indah

Very good diversification

The 3 months correlation between 7076 and Tambun is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding CB Industrial Product and Tambun Indah Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tambun Indah Land and CB Industrial 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 CB Industrial Product are associated (or correlated) with Tambun Indah. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tambun Indah Land has no effect on the direction of CB Industrial i.e., CB Industrial and Tambun Indah go up and down completely randomly.

Pair Corralation between CB Industrial and Tambun Indah

Assuming the 90 days trading horizon CB Industrial Product is expected to under-perform the Tambun Indah. In addition to that, CB Industrial is 1.21 times more volatile than Tambun Indah Land. It trades about -0.02 of its total potential returns per unit of risk. Tambun Indah Land is currently generating about -0.01 per unit of volatility. If you would invest  91.00  in Tambun Indah Land on October 25, 2024 and sell it today you would lose (1.00) from holding Tambun Indah Land or give up 1.1% of portfolio value over 90 days.

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

CB Industrial Product  vs.  Tambun Indah Land

CB Industrial Product

Risk-Adjusted Performance

0 of 100

Very Weak

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

Tambun Indah Land

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with CB Industrial and Tambun Indah

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

The idea behind CB Industrial Product and Tambun Indah Land 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.