Correlation Between Alkindo Naratama and Alakasa Industrindo

Can any of the company-specific risk be diversified away by investing in both Alkindo Naratama and Alakasa Industrindo 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 Alkindo Naratama and Alakasa Industrindo into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alkindo Naratama Tbk and Alakasa Industrindo Tbk, you can compare the effects of market volatilities on Alkindo Naratama and Alakasa Industrindo 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 Alkindo Naratama with a short position of Alakasa Industrindo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alkindo Naratama and Alakasa Industrindo.

Diversification Opportunities for Alkindo Naratama and Alakasa Industrindo

0.61

Correlation Coefficient

Alkindo Naratama  Alakasa Industrindo

Poor diversification

The 3 months correlation between Alkindo and Alakasa is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Alkindo Naratama Tbk and Alakasa Industrindo Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alakasa Industrindo Tbk and Alkindo Naratama 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 Alkindo Naratama Tbk are associated (or correlated) with Alakasa Industrindo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alakasa Industrindo Tbk has no effect on the direction of Alkindo Naratama i.e., Alkindo Naratama and Alakasa Industrindo go up and down completely randomly.

Pair Corralation between Alkindo Naratama and Alakasa Industrindo

Assuming the 90 days trading horizon Alkindo Naratama Tbk is expected to under-perform the Alakasa Industrindo. But the stock apears to be less risky and, when comparing its historical volatility, Alkindo Naratama Tbk is 1.12 times less risky than Alakasa Industrindo. The stock trades about -0.16 of its potential returns per unit of risk. The Alakasa Industrindo Tbk is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  36,200  in Alakasa Industrindo Tbk on December 29, 2024 and sell it today you would lose (5,600) from holding Alakasa Industrindo Tbk or give up 15.47% of portfolio value over 90 days.

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

Alkindo Naratama Tbk  vs.  Alakasa Industrindo Tbk

Alkindo Naratama Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alkindo Naratama Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Alakasa Industrindo Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alakasa Industrindo Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Alkindo Naratama and Alakasa Industrindo

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

The idea behind Alkindo Naratama Tbk and Alakasa Industrindo 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.