Correlation Between Arita Prima and Alkindo Naratama

Can any of the company-specific risk be diversified away by investing in both Arita Prima and Alkindo Naratama 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 Arita Prima and Alkindo Naratama into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Arita Prima Indonesia and Alkindo Naratama Tbk, you can compare the effects of market volatilities on Arita Prima and Alkindo Naratama 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 Arita Prima with a short position of Alkindo Naratama. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arita Prima and Alkindo Naratama.

Diversification Opportunities for Arita Prima and Alkindo Naratama

0.61

Correlation Coefficient

Arita Prima  Alkindo Naratama

Poor diversification

The 3 months correlation between Arita and Alkindo is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Arita Prima Indonesia and Alkindo Naratama Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alkindo Naratama Tbk and Arita Prima 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 Arita Prima Indonesia are associated (or correlated) with Alkindo Naratama. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alkindo Naratama Tbk has no effect on the direction of Arita Prima i.e., Arita Prima and Alkindo Naratama go up and down completely randomly.

Pair Corralation between Arita Prima and Alkindo Naratama

Assuming the 90 days trading horizon Arita Prima Indonesia is expected to generate 0.64 times more return on investment than Alkindo Naratama. However, Arita Prima Indonesia is 1.57 times less risky than Alkindo Naratama. It trades about -0.04 of its potential returns per unit of risk. Alkindo Naratama Tbk is currently generating about -0.16 per unit of risk. If you would invest  17,800  in Arita Prima Indonesia on December 30, 2024 and sell it today you would lose (800.00) from holding Arita Prima Indonesia or give up 4.49% of portfolio value over 90 days.

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

Arita Prima Indonesia  vs.  Alkindo Naratama Tbk

Arita Prima Indonesia

Risk-Adjusted Performance

Very Weak

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

Alkindo Naratama Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alkindo Naratama 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 April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Arita Prima and Alkindo Naratama

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

The idea behind Arita Prima Indonesia and Alkindo Naratama 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..