Correlation Between Bank Central and Indorama Synthetics

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

By analyzing existing cross correlation between Bank Central Asia and Indorama Synthetics Tbk, you can compare the effects of market volatilities on Bank Central and Indorama Synthetics 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 Bank Central with a short position of Indorama Synthetics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Central and Indorama Synthetics.

Diversification Opportunities for Bank Central and Indorama Synthetics

0.43

Correlation Coefficient

Bank Central  Indorama Synthetics

Very weak diversification

The 3 months correlation between Bank and Indorama is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Bank Central Asia and Indorama Synthetics Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indorama Synthetics Tbk and Bank Central 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 Bank Central Asia are associated (or correlated) with Indorama Synthetics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indorama Synthetics Tbk has no effect on the direction of Bank Central i.e., Bank Central and Indorama Synthetics go up and down completely randomly.

Pair Corralation between Bank Central and Indorama Synthetics

Assuming the 90 days trading horizon Bank Central Asia is expected to under-perform the Indorama Synthetics. But the stock apears to be less risky and, when comparing its historical volatility, Bank Central Asia is 1.24 times less risky than Indorama Synthetics. The stock trades about -0.11 of its potential returns per unit of risk. The Indorama Synthetics Tbk is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  267,000  in Indorama Synthetics Tbk on November 28, 2024 and sell it today you would lose (30,000) from holding Indorama Synthetics Tbk or give up 11.24% of portfolio value over 90 days.

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

Bank Central Asia  vs.  Indorama Synthetics Tbk

Bank Central Asia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bank Central Asia 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.

Indorama Synthetics Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Indorama Synthetics 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 Bank Central and Indorama Synthetics

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

The idea behind Bank Central Asia and Indorama Synthetics 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.

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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.