Correlation Between Alakasa Industrindo and Emdeki Utama

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

Diversification Opportunities for Alakasa Industrindo and Emdeki Utama

0.66

Correlation Coefficient

Alakasa Industrindo  Emdeki Utama

Poor diversification

The 3 months correlation between Alakasa and Emdeki is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Alakasa Industrindo Tbk and Emdeki Utama Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emdeki Utama 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 Emdeki Utama. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emdeki Utama Tbk has no effect on the direction of Alakasa Industrindo i.e., Alakasa Industrindo and Emdeki Utama go up and down completely randomly.

Pair Corralation between Alakasa Industrindo and Emdeki Utama

Assuming the 90 days trading horizon Alakasa Industrindo Tbk is expected to generate 6.16 times more return on investment than Emdeki Utama. However, Alakasa Industrindo is 6.16 times more volatile than Emdeki Utama Tbk. It trades about 0.02 of its potential returns per unit of risk. Emdeki Utama Tbk is currently generating about -0.14 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 Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Alakasa Industrindo Tbk  vs.  Emdeki Utama Tbk

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.

Emdeki Utama Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Emdeki Utama Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Emdeki Utama 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 Emdeki Utama

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

The idea behind Alakasa Industrindo Tbk and Emdeki Utama 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.