Correlation Between Arita Prima and Bayu Buana

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

Diversification Opportunities for Arita Prima and Bayu Buana

0.33
  Correlation Coefficient

Weak diversification

The 3 months correlation between Arita and Bayu is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Arita Prima Indonesia and Bayu Buana Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayu Buana 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 Bayu Buana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayu Buana Tbk has no effect on the direction of Arita Prima i.e., Arita Prima and Bayu Buana go up and down completely randomly.

Pair Corralation between Arita Prima and Bayu Buana

Assuming the 90 days trading horizon Arita Prima Indonesia is expected to under-perform the Bayu Buana. In addition to that, Arita Prima is 1.24 times more volatile than Bayu Buana Tbk. It trades about -0.02 of its total potential returns per unit of risk. Bayu Buana Tbk is currently generating about 0.02 per unit of volatility. If you would invest  136,500  in Bayu Buana Tbk on September 15, 2024 and sell it today you would earn a total of  1,000.00  from holding Bayu Buana Tbk or generate 0.73% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Arita Prima Indonesia  vs.  Bayu Buana Tbk

 Performance 
       Timeline  
Arita Prima Indonesia 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
Bayu Buana Tbk 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Bayu Buana Tbk are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Bayu Buana is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Arita Prima and Bayu Buana Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Arita Prima and Bayu Buana

The main advantage of trading using opposite Arita Prima and Bayu Buana positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arita Prima position performs unexpectedly, Bayu Buana 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 Bayu Buana will offset losses from the drop in Bayu Buana's long position.
The idea behind Arita Prima Indonesia and Bayu Buana 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.
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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.

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