Correlation Between Bali Towerindo and Emdeki Utama

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

By analyzing existing cross correlation between Bali Towerindo Sentra and Emdeki Utama Tbk, you can compare the effects of market volatilities on Bali Towerindo and Emdeki Utama 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 Bali Towerindo with a short position of Emdeki Utama. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bali Towerindo and Emdeki Utama.

Diversification Opportunities for Bali Towerindo and Emdeki Utama

-0.6

Correlation Coefficient

Bali Towerindo  Emdeki Utama

Excellent diversification

The 3 months correlation between Bali and Emdeki is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Bali Towerindo Sentra and Emdeki Utama Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emdeki Utama Tbk and Bali Towerindo 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 Bali Towerindo Sentra are associated (or correlated) with Emdeki Utama. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emdeki Utama Tbk has no effect on the direction of Bali Towerindo i.e., Bali Towerindo and Emdeki Utama go up and down completely randomly.

Pair Corralation between Bali Towerindo and Emdeki Utama

Assuming the 90 days trading horizon Bali Towerindo Sentra is expected to generate 4.68 times more return on investment than Emdeki Utama. However, Bali Towerindo is 4.68 times more volatile than Emdeki Utama Tbk. It trades about 0.06 of its potential returns per unit of risk. Emdeki Utama Tbk is currently generating about 0.01 per unit of risk. If you would invest  74,586  in Bali Towerindo Sentra on October 11, 2024 and sell it today you would earn a total of  77,414  from holding Bali Towerindo Sentra or generate 103.79% return on investment over 90 days.

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

Bali Towerindo Sentra  vs.  Emdeki Utama Tbk

Bali Towerindo Sentra

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bali Towerindo Sentra are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Bali Towerindo disclosed solid returns over the last few months and may actually be approaching a breakup point.

Emdeki Utama Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Emdeki Utama Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Bali Towerindo and Emdeki Utama

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

The idea behind Bali Towerindo Sentra and Emdeki Utama 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.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.