Correlation Between Alumindo Light and Dunia Virtual

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

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

Diversification Opportunities for Alumindo Light and Dunia Virtual

0.29

Correlation Coefficient

Alumindo Light  Dunia Virtual

Modest diversification

The 3 months correlation between Alumindo and Dunia is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Alumindo Light Metal and Dunia Virtual Online in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dunia Virtual Online and Alumindo Light 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 Alumindo Light Metal are associated (or correlated) with Dunia Virtual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dunia Virtual Online has no effect on the direction of Alumindo Light i.e., Alumindo Light and Dunia Virtual go up and down completely randomly.

Pair Corralation between Alumindo Light and Dunia Virtual

Assuming the 90 days trading horizon Alumindo Light Metal is expected to generate 1.04 times more return on investment than Dunia Virtual. However, Alumindo Light is 1.04 times more volatile than Dunia Virtual Online. It trades about 0.01 of its potential returns per unit of risk. Dunia Virtual Online is currently generating about -0.03 per unit of risk. If you would invest  7,500  in Alumindo Light Metal on September 15, 2024 and sell it today you would lose (100.00) from holding Alumindo Light Metal or give up 1.33% of portfolio value over 90 days.

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

Alumindo Light Metal  vs.  Dunia Virtual Online

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.

Dunia Virtual Online

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Alumindo Light Metal and Dunia Virtual Online 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.

Check out your portfolio center.

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 Global Correlations module to find global opportunities by holding instruments from different markets.