Correlation Between Buana Finance and Pacific Strategic

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

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

Diversification Opportunities for Buana Finance and Pacific Strategic

0.23

Correlation Coefficient

Buana Finance  Pacific Strategic

Modest diversification

The 3 months correlation between Buana and Pacific is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Buana Finance Tbk and Pacific Strategic Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Strategic and Buana Finance 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 Buana Finance Tbk are associated (or correlated) with Pacific Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Strategic has no effect on the direction of Buana Finance i.e., Buana Finance and Pacific Strategic go up and down completely randomly.

Pair Corralation between Buana Finance and Pacific Strategic

Assuming the 90 days trading horizon Buana Finance Tbk is expected to under-perform the Pacific Strategic. In addition to that, Buana Finance is 1.57 times more volatile than Pacific Strategic Financial. It trades about -0.04 of its total potential returns per unit of risk. Pacific Strategic Financial is currently generating about -0.05 per unit of volatility. If you would invest  109,500  in Pacific Strategic Financial on December 30, 2024 and sell it today you would lose (6,000) from holding Pacific Strategic Financial or give up 5.48% of portfolio value over 90 days.

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

Buana Finance Tbk  vs.  Pacific Strategic Financial

Buana Finance Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Buana Finance 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.

Pacific Strategic

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pacific Strategic Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Pacific Strategic 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 Buana Finance and Pacific Strategic

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

The idea behind Buana Finance Tbk and Pacific Strategic Financial 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.