Correlation Between Bhakti Multi and Transcoal Pacific

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

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

Diversification Opportunities for Bhakti Multi and Transcoal Pacific

0.41

Correlation Coefficient

Bhakti Multi  Transcoal Pacific

Very weak diversification

The 3 months correlation between Bhakti and Transcoal is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Bhakti Multi Artha and Transcoal Pacific Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transcoal Pacific Tbk and Bhakti Multi 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 Bhakti Multi Artha are associated (or correlated) with Transcoal Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transcoal Pacific Tbk has no effect on the direction of Bhakti Multi i.e., Bhakti Multi and Transcoal Pacific go up and down completely randomly.

Pair Corralation between Bhakti Multi and Transcoal Pacific

Assuming the 90 days trading horizon Bhakti Multi Artha is expected to under-perform the Transcoal Pacific. But the stock apears to be less risky and, when comparing its historical volatility, Bhakti Multi Artha is 1.38 times less risky than Transcoal Pacific. The stock trades about -0.15 of its potential returns per unit of risk. The Transcoal Pacific Tbk is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  707,500  in Transcoal Pacific Tbk on October 11, 2024 and sell it today you would lose (57,500) from holding Transcoal Pacific Tbk or give up 8.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Bhakti Multi Artha  vs.  Transcoal Pacific Tbk

Bhakti Multi Artha

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bhakti 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.

Transcoal Pacific Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transcoal Pacific 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 Bhakti Multi and Transcoal Pacific

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

The idea behind Bhakti Multi Artha and Transcoal Pacific 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.