Correlation Between Bali Towerindo and Protech Mitra

Can any of the company-specific risk be diversified away by investing in both Bali Towerindo and Protech Mitra 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 Protech Mitra 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 Protech Mitra Perkasa, you can compare the effects of market volatilities on Bali Towerindo and Protech Mitra 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 Protech Mitra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bali Towerindo and Protech Mitra.

Diversification Opportunities for Bali Towerindo and Protech Mitra

-0.52

Correlation Coefficient

Bali Towerindo  Protech Mitra

Excellent diversification

The 3 months correlation between Bali and Protech is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Bali Towerindo Sentra and Protech Mitra Perkasa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Protech Mitra Perkasa 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 Protech Mitra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Protech Mitra Perkasa has no effect on the direction of Bali Towerindo i.e., Bali Towerindo and Protech Mitra go up and down completely randomly.

Pair Corralation between Bali Towerindo and Protech Mitra

Assuming the 90 days trading horizon Bali Towerindo Sentra is expected to generate 1.86 times more return on investment than Protech Mitra. However, Bali Towerindo is 1.86 times more volatile than Protech Mitra Perkasa. It trades about 0.25 of its potential returns per unit of risk. Protech Mitra Perkasa is currently generating about 0.03 per unit of risk. If you would invest  81,500  in Bali Towerindo Sentra on September 5, 2024 and sell it today you would earn a total of  57,000  from holding Bali Towerindo Sentra or generate 69.94% return on investment over 90 days.

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

Bali Towerindo Sentra  vs.  Protech Mitra Perkasa

Bali Towerindo Sentra

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bali Towerindo Sentra are ranked lower than 19 (%) 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.

Protech Mitra Perkasa

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Protech Mitra Perkasa are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Protech Mitra 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 Bali Towerindo and Protech Mitra

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

The idea behind Bali Towerindo Sentra and Protech Mitra Perkasa 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.