Correlation Between PT Arkora and PT Chemstar

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

By analyzing existing cross correlation between PT Arkora Hydro and PT Chemstar Indonesia, you can compare the effects of market volatilities on PT Arkora and PT Chemstar 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 PT Arkora with a short position of PT Chemstar. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Arkora and PT Chemstar.

Diversification Opportunities for PT Arkora and PT Chemstar

0.31

Correlation Coefficient

PT Arkora  PT Chemstar

Weak diversification

The 3 months correlation between ARKO and CHEM is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding PT Arkora Hydro and PT Chemstar Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Chemstar Indonesia and PT Arkora 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 PT Arkora Hydro are associated (or correlated) with PT Chemstar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Chemstar Indonesia has no effect on the direction of PT Arkora i.e., PT Arkora and PT Chemstar go up and down completely randomly.

Pair Corralation between PT Arkora and PT Chemstar

Assuming the 90 days trading horizon PT Arkora Hydro is expected to generate 0.53 times more return on investment than PT Chemstar. However, PT Arkora Hydro is 1.89 times less risky than PT Chemstar. It trades about 0.0 of its potential returns per unit of risk. PT Chemstar Indonesia is currently generating about -0.01 per unit of risk. If you would invest  94,000  in PT Arkora Hydro on December 19, 2024 and sell it today you would lose (3,000) from holding PT Arkora Hydro or give up 3.19% of portfolio value over 90 days.

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

PT Arkora Hydro  vs.  PT Chemstar Indonesia

PT Arkora Hydro

Risk-Adjusted Performance

Very Weak

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

PT Chemstar Indonesia

Risk-Adjusted Performance

Very Weak

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

Pair Trading with PT Arkora and PT Chemstar

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

The idea behind PT Arkora Hydro and PT Chemstar Indonesia 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.