Correlation Between Austindo Nusantara and Cisadane Sawit

Can any of the company-specific risk be diversified away by investing in both Austindo Nusantara and Cisadane Sawit 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 Austindo Nusantara and Cisadane Sawit into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Austindo Nusantara Jaya and Cisadane Sawit Raya, you can compare the effects of market volatilities on Austindo Nusantara and Cisadane Sawit 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 Austindo Nusantara with a short position of Cisadane Sawit. Check out your portfolio center. Please also check ongoing floating volatility patterns of Austindo Nusantara and Cisadane Sawit.

Diversification Opportunities for Austindo Nusantara and Cisadane Sawit

0.59

Correlation Coefficient

Austindo Nusantara  Cisadane Sawit

Very weak diversification

The 3 months correlation between Austindo and Cisadane is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Austindo Nusantara Jaya and Cisadane Sawit Raya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cisadane Sawit Raya and Austindo Nusantara 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 Austindo Nusantara Jaya are associated (or correlated) with Cisadane Sawit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cisadane Sawit Raya has no effect on the direction of Austindo Nusantara i.e., Austindo Nusantara and Cisadane Sawit go up and down completely randomly.

Pair Corralation between Austindo Nusantara and Cisadane Sawit

Assuming the 90 days trading horizon Austindo Nusantara is expected to generate 2.95 times less return on investment than Cisadane Sawit. But when comparing it to its historical volatility, Austindo Nusantara Jaya is 1.57 times less risky than Cisadane Sawit. It trades about 0.11 of its potential returns per unit of risk. Cisadane Sawit Raya is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  60,500  in Cisadane Sawit Raya on September 15, 2024 and sell it today you would earn a total of  14,000  from holding Cisadane Sawit Raya or generate 23.14% return on investment over 90 days.

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

Austindo Nusantara Jaya  vs.  Cisadane Sawit Raya

Austindo Nusantara Jaya

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Austindo Nusantara Jaya are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Austindo Nusantara may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Cisadane Sawit Raya

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cisadane Sawit Raya are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Cisadane Sawit disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Austindo Nusantara and Cisadane Sawit

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

The idea behind Austindo Nusantara Jaya and Cisadane Sawit Raya 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.