Correlation Between Alakasa Industrindo and Cita Mineral

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

Diversification Opportunities for Alakasa Industrindo and Cita Mineral

0.81

Correlation Coefficient

Alakasa Industrindo  Cita Mineral

Very poor diversification

The 3 months correlation between Alakasa and Cita is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Alakasa Industrindo Tbk and Cita Mineral Investindo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cita Mineral Investindo 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 Cita Mineral. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cita Mineral Investindo has no effect on the direction of Alakasa Industrindo i.e., Alakasa Industrindo and Cita Mineral go up and down completely randomly.

Pair Corralation between Alakasa Industrindo and Cita Mineral

Assuming the 90 days trading horizon Alakasa Industrindo Tbk is expected to generate 1.56 times more return on investment than Cita Mineral. However, Alakasa Industrindo is 1.56 times more volatile than Cita Mineral Investindo. It trades about -0.09 of its potential returns per unit of risk. Cita Mineral Investindo is currently generating about -0.19 per unit of risk. 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	Strong
Accuracy	100.0%
Values	Daily Returns

Alakasa Industrindo Tbk  vs.  Cita Mineral Investindo

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 weak 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.

Cita Mineral Investindo

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cita Mineral Investindo has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak 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 Alakasa Industrindo and Cita Mineral

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

The idea behind Alakasa Industrindo Tbk and Cita Mineral Investindo 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.