Correlation Between Alumindo Light and PT Estee

Can any of the company-specific risk be diversified away by investing in both Alumindo Light and PT Estee 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 PT Estee 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 PT Estee Gold, you can compare the effects of market volatilities on Alumindo Light and PT Estee 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 PT Estee. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alumindo Light and PT Estee.

Diversification Opportunities for Alumindo Light and PT Estee

-0.01

Correlation Coefficient

Alumindo Light  PT Estee

Good diversification

The 3 months correlation between Alumindo and EURO is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Alumindo Light Metal and PT Estee Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Estee Gold 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 PT Estee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Estee Gold has no effect on the direction of Alumindo Light i.e., Alumindo Light and PT Estee go up and down completely randomly.

Pair Corralation between Alumindo Light and PT Estee

Assuming the 90 days trading horizon Alumindo Light Metal is expected to generate 0.29 times more return on investment than PT Estee. However, Alumindo Light Metal is 3.47 times less risky than PT Estee. It trades about 0.01 of its potential returns per unit of risk. PT Estee Gold is currently generating about 0.0 per unit of risk. If you would invest  7,400  in Alumindo Light Metal on October 24, 2024 and sell it today you would earn a total of  0.00  from holding Alumindo Light Metal or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Alumindo Light Metal  vs.  PT Estee Gold

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.

PT Estee Gold

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Alumindo Light Metal and PT Estee Gold 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.