Correlation Between Alakasa Industrindo and Betonjaya Manunggal

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

Diversification Opportunities for Alakasa Industrindo and Betonjaya Manunggal

0.38

Correlation Coefficient

Alakasa Industrindo  Betonjaya Manunggal

Weak diversification

The 3 months correlation between Alakasa and Betonjaya is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Alakasa Industrindo Tbk and Betonjaya Manunggal Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Betonjaya Manunggal Tbk 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 Betonjaya Manunggal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Betonjaya Manunggal Tbk has no effect on the direction of Alakasa Industrindo i.e., Alakasa Industrindo and Betonjaya Manunggal go up and down completely randomly.

Pair Corralation between Alakasa Industrindo and Betonjaya Manunggal

Assuming the 90 days trading horizon Alakasa Industrindo Tbk is expected to generate 0.96 times more return on investment than Betonjaya Manunggal. However, Alakasa Industrindo Tbk is 1.04 times less risky than Betonjaya Manunggal. It trades about 0.03 of its potential returns per unit of risk. Betonjaya Manunggal Tbk is currently generating about 0.02 per unit of risk. If you would invest  36,200  in Alakasa Industrindo Tbk on September 16, 2024 and sell it today you would earn a total of  1,200  from holding Alakasa Industrindo Tbk or generate 3.31% return on investment over 90 days.

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

Alakasa Industrindo Tbk  vs.  Betonjaya Manunggal Tbk

Alakasa Industrindo Tbk

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alakasa Industrindo Tbk are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Alakasa Industrindo may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Betonjaya Manunggal Tbk

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Betonjaya Manunggal Tbk are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Betonjaya Manunggal 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 Betonjaya Manunggal

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

The idea behind Alakasa Industrindo Tbk and Betonjaya Manunggal 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.