Correlation Between Alakasa Industrindo and Alumindo Light

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

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

Diversification Opportunities for Alakasa Industrindo and Alumindo Light

-0.53

Correlation Coefficient

Alakasa Industrindo  Alumindo Light

Excellent diversification

The 3 months correlation between Alakasa and Alumindo is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Alakasa Industrindo Tbk and Alumindo Light Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alumindo Light Metal and Alakasa Industrindo 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 Alakasa Industrindo Tbk are associated (or correlated) with Alumindo Light. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alumindo Light Metal has no effect on the direction of Alakasa Industrindo i.e., Alakasa Industrindo and Alumindo Light go up and down completely randomly.

Pair Corralation between Alakasa Industrindo and Alumindo Light

Assuming the 90 days trading horizon Alakasa Industrindo Tbk is expected to generate 1.13 times more return on investment than Alumindo Light. However, Alakasa Industrindo is 1.13 times more volatile than Alumindo Light Metal. It trades about 0.02 of its potential returns per unit of risk. Alumindo Light Metal is currently generating about -0.02 per unit of risk. If you would invest  37,200  in Alakasa Industrindo Tbk on September 13, 2024 and sell it today you would earn a total of  600.00  from holding Alakasa Industrindo Tbk or generate 1.61% return on investment over 90 days.

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

Alakasa Industrindo Tbk  vs.  Alumindo Light Metal

Alakasa Industrindo Tbk

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alakasa Industrindo Tbk are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Alakasa Industrindo is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Alumindo Light Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alumindo Light Metal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Alumindo Light 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 Alakasa Industrindo and Alumindo Light

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

The idea behind Alakasa Industrindo Tbk and Alumindo Light Metal 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.