Correlation Between Archi Indonesia and Triputra Agro

Can any of the company-specific risk be diversified away by investing in both Archi Indonesia and Triputra Agro 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 Archi Indonesia and Triputra Agro into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Archi Indonesia and Triputra Agro

0.14

Correlation Coefficient

Archi Indonesia  Triputra Agro

Average diversification

The 3 months correlation between Archi and Triputra is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Archi Indonesia Tbk and Triputra Agro Persada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Triputra Agro Persada and Archi Indonesia 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 Archi Indonesia Tbk are associated (or correlated) with Triputra Agro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Triputra Agro Persada has no effect on the direction of Archi Indonesia i.e., Archi Indonesia and Triputra Agro go up and down completely randomly.

Pair Corralation between Archi Indonesia and Triputra Agro

Assuming the 90 days trading horizon Archi Indonesia is expected to generate 2.85 times less return on investment than Triputra Agro. In addition to that, Archi Indonesia is 1.38 times more volatile than Triputra Agro Persada. It trades about 0.03 of its total potential returns per unit of risk. Triputra Agro Persada is currently generating about 0.13 per unit of volatility. If you would invest  76,500  in Triputra Agro Persada on December 30, 2024 and sell it today you would earn a total of  11,500  from holding Triputra Agro Persada or generate 15.03% return on investment over 90 days.

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

Archi Indonesia Tbk  vs.  Triputra Agro Persada

Archi Indonesia Tbk

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Archi Indonesia Tbk are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Archi Indonesia is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Triputra Agro Persada

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Triputra Agro Persada are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Triputra Agro disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Archi Indonesia and Triputra Agro

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

The idea behind Archi Indonesia Tbk and Triputra Agro Persada 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.