Correlation Between Asuransi Multi and BFI Finance

Can any of the company-specific risk be diversified away by investing in both Asuransi Multi and BFI Finance 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 Asuransi Multi and BFI Finance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Asuransi Multi Artha and BFI Finance Indonesia, you can compare the effects of market volatilities on Asuransi Multi and BFI Finance 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 Asuransi Multi with a short position of BFI Finance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asuransi Multi and BFI Finance.

Diversification Opportunities for Asuransi Multi and BFI Finance

0.35

Correlation Coefficient

Asuransi Multi  BFI Finance

Weak diversification

The 3 months correlation between Asuransi and BFI is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Asuransi Multi Artha and BFI Finance Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BFI Finance Indonesia and Asuransi Multi 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 Asuransi Multi Artha are associated (or correlated) with BFI Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BFI Finance Indonesia has no effect on the direction of Asuransi Multi i.e., Asuransi Multi and BFI Finance go up and down completely randomly.

Pair Corralation between Asuransi Multi and BFI Finance

Assuming the 90 days trading horizon Asuransi Multi Artha is expected to under-perform the BFI Finance. But the stock apears to be less risky and, when comparing its historical volatility, Asuransi Multi Artha is 1.65 times less risky than BFI Finance. The stock trades about -0.13 of its potential returns per unit of risk. The BFI Finance Indonesia is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  98,000  in BFI Finance Indonesia on September 5, 2024 and sell it today you would lose (7,500) from holding BFI Finance Indonesia or give up 7.65% of portfolio value over 90 days.

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

Asuransi Multi Artha  vs.  BFI Finance Indonesia

Asuransi Multi Artha

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Asuransi Multi Artha has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

BFI Finance Indonesia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BFI Finance Indonesia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, BFI Finance 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 Asuransi Multi and BFI Finance

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

The idea behind Asuransi Multi Artha and BFI Finance Indonesia 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.