Correlation Between Alumindo Light and Panin Financial

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

Diversification Opportunities for Alumindo Light and Panin Financial

0.28

Correlation Coefficient

Alumindo Light  Panin Financial

Modest diversification

The 3 months correlation between Alumindo and Panin is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Alumindo Light Metal and Panin Financial Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Panin Financial Tbk 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 Panin Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Panin Financial Tbk has no effect on the direction of Alumindo Light i.e., Alumindo Light and Panin Financial go up and down completely randomly.

Pair Corralation between Alumindo Light and Panin Financial

Assuming the 90 days trading horizon Alumindo Light is expected to generate 3.81 times less return on investment than Panin Financial. In addition to that, Alumindo Light is 1.08 times more volatile than Panin Financial Tbk. It trades about 0.01 of its total potential returns per unit of risk. Panin Financial Tbk is currently generating about 0.04 per unit of volatility. If you would invest  43,200  in Panin Financial Tbk on September 15, 2024 and sell it today you would earn a total of  2,000  from holding Panin Financial Tbk or generate 4.63% return on investment over 90 days.

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

Alumindo Light Metal  vs.  Panin Financial Tbk

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.

Panin Financial Tbk

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Panin Financial Tbk are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Panin Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Alumindo Light and Panin Financial

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

The idea behind Alumindo Light Metal and Panin Financial 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.

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 CEOs Directory module to screen CEOs from public companies around the world.