Correlation Between Bekasi Fajar and Optima Prima

Can any of the company-specific risk be diversified away by investing in both Bekasi Fajar and Optima Prima 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 Bekasi Fajar and Optima Prima into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bekasi Fajar Industrial and Optima Prima Metal, you can compare the effects of market volatilities on Bekasi Fajar and Optima Prima 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 Bekasi Fajar with a short position of Optima Prima. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bekasi Fajar and Optima Prima.

Diversification Opportunities for Bekasi Fajar and Optima Prima

0.9

Correlation Coefficient

Bekasi Fajar  Optima Prima

Almost no diversification

The 3 months correlation between Bekasi and Optima is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Bekasi Fajar Industrial and Optima Prima Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optima Prima Metal and Bekasi Fajar 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 Bekasi Fajar Industrial are associated (or correlated) with Optima Prima. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optima Prima Metal has no effect on the direction of Bekasi Fajar i.e., Bekasi Fajar and Optima Prima go up and down completely randomly.

Pair Corralation between Bekasi Fajar and Optima Prima

Assuming the 90 days trading horizon Bekasi Fajar Industrial is expected to generate 0.61 times more return on investment than Optima Prima. However, Bekasi Fajar Industrial is 1.65 times less risky than Optima Prima. It trades about -0.02 of its potential returns per unit of risk. Optima Prima Metal is currently generating about -0.02 per unit of risk. If you would invest  13,100  in Bekasi Fajar Industrial on October 11, 2024 and sell it today you would lose (3,200) from holding Bekasi Fajar Industrial or give up 24.43% of portfolio value over 90 days.

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

Bekasi Fajar Industrial  vs.  Optima Prima Metal

Bekasi Fajar Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bekasi Fajar Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Optima Prima Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Optima Prima Metal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Bekasi Fajar and Optima Prima

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

The idea behind Bekasi Fajar Industrial and Optima Prima Metal 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.