Correlation Between Bayu Buana and Akasha Wira

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

By analyzing existing cross correlation between Bayu Buana Tbk and Akasha Wira International, you can compare the effects of market volatilities on Bayu Buana and Akasha Wira 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 Bayu Buana with a short position of Akasha Wira. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bayu Buana and Akasha Wira.

Diversification Opportunities for Bayu Buana and Akasha Wira

0.6

Correlation Coefficient

Bayu Buana  Akasha Wira

Poor diversification

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

Pair Corralation between Bayu Buana and Akasha Wira

Assuming the 90 days trading horizon Bayu Buana Tbk is expected to under-perform the Akasha Wira. But the stock apears to be less risky and, when comparing its historical volatility, Bayu Buana Tbk is 1.31 times less risky than Akasha Wira. The stock trades about -0.15 of its potential returns per unit of risk. The Akasha Wira International is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  995,000  in Akasha Wira International on November 19, 2024 and sell it today you would lose (77,500) from holding Akasha Wira International or give up 7.79% of portfolio value over 90 days.

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

Bayu Buana Tbk  vs.  Akasha Wira International

Bayu Buana Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bayu Buana 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.

Akasha Wira International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Akasha Wira International 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 Bayu Buana and Akasha Wira

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

The idea behind Bayu Buana Tbk and Akasha Wira International 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.