Correlation Between BFI Finance and Asuransi Multi

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

By analyzing existing cross correlation between BFI Finance Indonesia and Asuransi Multi Artha, you can compare the effects of market volatilities on BFI Finance and Asuransi Multi 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 BFI Finance with a short position of Asuransi Multi. Check out your portfolio center. Please also check ongoing floating volatility patterns of BFI Finance and Asuransi Multi.

Diversification Opportunities for BFI Finance and Asuransi Multi

0.35

Correlation Coefficient

BFI Finance  Asuransi Multi

Weak diversification

The 3 months correlation between BFI and Asuransi is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding BFI Finance Indonesia and Asuransi Multi Artha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asuransi Multi Artha and BFI 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 BFI Finance Indonesia are associated (or correlated) with Asuransi Multi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asuransi Multi Artha has no effect on the direction of BFI Finance i.e., BFI Finance and Asuransi Multi go up and down completely randomly.

Pair Corralation between BFI Finance and Asuransi Multi

Assuming the 90 days trading horizon BFI Finance Indonesia is expected to under-perform the Asuransi Multi. In addition to that, BFI Finance is 3.05 times more volatile than Asuransi Multi Artha. It trades about -0.1 of its total potential returns per unit of risk. Asuransi Multi Artha is currently generating about -0.19 per unit of volatility. If you would invest  34,400  in Asuransi Multi Artha on September 5, 2024 and sell it today you would lose (1,400) from holding Asuransi Multi Artha or give up 4.07% of portfolio value over 90 days.

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

BFI Finance Indonesia  vs.  Asuransi Multi Artha

BFI Finance Indonesia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BFI Finance Indonesia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, BFI Finance is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Asuransi Multi Artha

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Asuransi Multi Artha 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 BFI Finance and Asuransi Multi

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

The idea behind BFI Finance Indonesia and Asuransi Multi Artha 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.