Correlation Between Andalan Sakti and Bank Amar

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

By analyzing existing cross correlation between Andalan Sakti Primaindo and Bank Amar Indonesia, you can compare the effects of market volatilities on Andalan Sakti and Bank Amar 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 Andalan Sakti with a short position of Bank Amar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Andalan Sakti and Bank Amar.

Diversification Opportunities for Andalan Sakti and Bank Amar

0.86

Correlation Coefficient

Andalan Sakti  Bank Amar

Very poor diversification

The 3 months correlation between Andalan and Bank is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Andalan Sakti Primaindo and Bank Amar Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Amar Indonesia and Andalan Sakti 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 Andalan Sakti Primaindo are associated (or correlated) with Bank Amar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Amar Indonesia has no effect on the direction of Andalan Sakti i.e., Andalan Sakti and Bank Amar go up and down completely randomly.

Pair Corralation between Andalan Sakti and Bank Amar

Assuming the 90 days trading horizon Andalan Sakti Primaindo is expected to generate 2.0 times more return on investment than Bank Amar. However, Andalan Sakti is 2.0 times more volatile than Bank Amar Indonesia. It trades about 0.05 of its potential returns per unit of risk. Bank Amar Indonesia is currently generating about -0.02 per unit of risk. If you would invest  9,600  in Andalan Sakti Primaindo on September 4, 2024 and sell it today you would earn a total of  6,600  from holding Andalan Sakti Primaindo or generate 68.75% return on investment over 90 days.

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

Andalan Sakti Primaindo  vs.  Bank Amar Indonesia

Andalan Sakti Primaindo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Andalan Sakti Primaindo 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 January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Bank Amar Indonesia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank Amar Indonesia 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 January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Andalan Sakti and Bank Amar

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

The idea behind Andalan Sakti Primaindo and Bank Amar 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.