Correlation Between Arita Prima and Bali Towerindo

Can any of the company-specific risk be diversified away by investing in both Arita Prima and Bali Towerindo 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 Bali Towerindo 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 Bali Towerindo Sentra, you can compare the effects of market volatilities on Arita Prima and Bali Towerindo 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 Bali Towerindo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arita Prima and Bali Towerindo.

Diversification Opportunities for Arita Prima and Bali Towerindo

0.27

Correlation Coefficient

Arita Prima  Bali Towerindo

Modest diversification

The 3 months correlation between Arita and Bali is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Arita Prima Indonesia and Bali Towerindo Sentra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bali Towerindo Sentra 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 Bali Towerindo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bali Towerindo Sentra has no effect on the direction of Arita Prima i.e., Arita Prima and Bali Towerindo go up and down completely randomly.

Pair Corralation between Arita Prima and Bali Towerindo

Assuming the 90 days trading horizon Arita Prima Indonesia is expected to generate 0.47 times more return on investment than Bali Towerindo. However, Arita Prima Indonesia is 2.11 times less risky than Bali Towerindo. It trades about -0.04 of its potential returns per unit of risk. Bali Towerindo Sentra is currently generating about -0.17 per unit of risk. If you would invest  17,800  in Arita Prima Indonesia on December 29, 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

Arita Prima Indonesia  vs.  Bali Towerindo Sentra

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.

Bali Towerindo Sentra

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bali Towerindo Sentra 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 Bali Towerindo

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

The idea behind Arita Prima Indonesia and Bali Towerindo Sentra 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.