Correlation Between Alkindo Naratama and Arita Prima

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

Diversification Opportunities for Alkindo Naratama and Arita Prima

0.73

Correlation Coefficient

Alkindo Naratama  Arita Prima

Poor diversification

The 3 months correlation between Alkindo and Arita is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Alkindo Naratama Tbk and Arita Prima Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arita Prima Indonesia 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 Arita Prima. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arita Prima Indonesia has no effect on the direction of Alkindo Naratama i.e., Alkindo Naratama and Arita Prima go up and down completely randomly.

Pair Corralation between Alkindo Naratama and Arita Prima

Assuming the 90 days trading horizon Alkindo Naratama Tbk is expected to under-perform the Arita Prima. In addition to that, Alkindo Naratama is 1.57 times more volatile than Arita Prima Indonesia. It trades about -0.16 of its total potential returns per unit of risk. Arita Prima Indonesia is currently generating about -0.04 per unit of volatility. If you would invest  17,800  in Arita Prima Indonesia on December 30, 2024 and sell it today you would lose (800.00) from holding Arita Prima Indonesia or give up 4.49% 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.  Arita Prima Indonesia

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.

Arita Prima Indonesia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arita Prima Indonesia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Arita Prima 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 Alkindo Naratama and Arita Prima

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

The idea behind Alkindo Naratama Tbk and Arita Prima Indonesia 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.