Correlation Between Pacific Strategic and Asuransi Bintang

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

By analyzing existing cross correlation between Pacific Strategic Financial and Asuransi Bintang Tbk, you can compare the effects of market volatilities on Pacific Strategic and Asuransi Bintang 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 Pacific Strategic with a short position of Asuransi Bintang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacific Strategic and Asuransi Bintang.

Diversification Opportunities for Pacific Strategic and Asuransi Bintang

0.6

Correlation Coefficient

Pacific Strategic  Asuransi Bintang

Poor diversification

The 3 months correlation between Pacific and Asuransi is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Strategic Financial and Asuransi Bintang Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asuransi Bintang Tbk and Pacific Strategic 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 Pacific Strategic Financial are associated (or correlated) with Asuransi Bintang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asuransi Bintang Tbk has no effect on the direction of Pacific Strategic i.e., Pacific Strategic and Asuransi Bintang go up and down completely randomly.

Pair Corralation between Pacific Strategic and Asuransi Bintang

Assuming the 90 days trading horizon Pacific Strategic Financial is expected to generate 0.3 times more return on investment than Asuransi Bintang. However, Pacific Strategic Financial is 3.35 times less risky than Asuransi Bintang. It trades about -0.04 of its potential returns per unit of risk. Asuransi Bintang Tbk is currently generating about -0.07 per unit of risk. If you would invest  105,500  in Pacific Strategic Financial on September 3, 2024 and sell it today you would lose (4,000) from holding Pacific Strategic Financial or give up 3.79% of portfolio value over 90 days.

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

Pacific Strategic Financial  vs.  Asuransi Bintang Tbk

Pacific Strategic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pacific Strategic Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Pacific Strategic is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Asuransi Bintang Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Asuransi Bintang Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Pacific Strategic and Asuransi Bintang

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

The idea behind Pacific Strategic Financial and Asuransi Bintang 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.