Correlation Between AIR PRODCHEMICALS and HEXINDO ADIPERKASA

Can any of the company-specific risk be diversified away by investing in both AIR PRODCHEMICALS and HEXINDO ADIPERKASA 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 AIR PRODCHEMICALS and HEXINDO ADIPERKASA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AIR PRODCHEMICALS and HEXINDO ADIPERKASA, you can compare the effects of market volatilities on AIR PRODCHEMICALS and HEXINDO ADIPERKASA 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 AIR PRODCHEMICALS with a short position of HEXINDO ADIPERKASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of AIR PRODCHEMICALS and HEXINDO ADIPERKASA.

Diversification Opportunities for AIR PRODCHEMICALS and HEXINDO ADIPERKASA

-0.24

Correlation Coefficient

AIR PRODCHEMICALS  HEXINDO ADIPERKASA

Very good diversification

The 3 months correlation between AIR and HEXINDO is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding AIR PRODCHEMICALS and HEXINDO ADIPERKASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEXINDO ADIPERKASA and AIR PRODCHEMICALS 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 AIR PRODCHEMICALS are associated (or correlated) with HEXINDO ADIPERKASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEXINDO ADIPERKASA has no effect on the direction of AIR PRODCHEMICALS i.e., AIR PRODCHEMICALS and HEXINDO ADIPERKASA go up and down completely randomly.

Pair Corralation between AIR PRODCHEMICALS and HEXINDO ADIPERKASA

Assuming the 90 days trading horizon AIR PRODCHEMICALS is expected to under-perform the HEXINDO ADIPERKASA. But the stock apears to be less risky and, when comparing its historical volatility, AIR PRODCHEMICALS is 1.36 times less risky than HEXINDO ADIPERKASA. The stock trades about -1.01 of its potential returns per unit of risk. The HEXINDO ADIPERKASA is currently generating about -0.24 of returns per unit of risk over similar time horizon. If you would invest  30.00  in HEXINDO ADIPERKASA on October 9, 2024 and sell it today you would lose (1.00) from holding HEXINDO ADIPERKASA or give up 3.33% of portfolio value over 90 days.

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

AIR PRODCHEMICALS  vs.  HEXINDO ADIPERKASA

AIR PRODCHEMICALS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AIR PRODCHEMICALS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, AIR PRODCHEMICALS is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

HEXINDO ADIPERKASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HEXINDO ADIPERKASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with AIR PRODCHEMICALS and HEXINDO ADIPERKASA

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

The idea behind AIR PRODCHEMICALS and HEXINDO ADIPERKASA 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.