Correlation Between Bhuwanatala Indah and Alakasa Industrindo

Can any of the company-specific risk be diversified away by investing in both Bhuwanatala Indah and Alakasa Industrindo 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 Bhuwanatala Indah and Alakasa Industrindo into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bhuwanatala Indah Permai and Alakasa Industrindo Tbk, you can compare the effects of market volatilities on Bhuwanatala Indah and Alakasa Industrindo 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 Bhuwanatala Indah with a short position of Alakasa Industrindo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bhuwanatala Indah and Alakasa Industrindo.

Diversification Opportunities for Bhuwanatala Indah and Alakasa Industrindo

-0.49

Correlation Coefficient

Bhuwanatala Indah  Alakasa Industrindo

Very good diversification

The 3 months correlation between Bhuwanatala and Alakasa is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Bhuwanatala Indah Permai and Alakasa Industrindo Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alakasa Industrindo Tbk and Bhuwanatala Indah 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 Bhuwanatala Indah Permai are associated (or correlated) with Alakasa Industrindo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alakasa Industrindo Tbk has no effect on the direction of Bhuwanatala Indah i.e., Bhuwanatala Indah and Alakasa Industrindo go up and down completely randomly.

Pair Corralation between Bhuwanatala Indah and Alakasa Industrindo

Assuming the 90 days trading horizon Bhuwanatala Indah Permai is expected to generate 0.79 times more return on investment than Alakasa Industrindo. However, Bhuwanatala Indah Permai is 1.26 times less risky than Alakasa Industrindo. It trades about 0.1 of its potential returns per unit of risk. Alakasa Industrindo Tbk is currently generating about 0.03 per unit of risk. If you would invest  2,700  in Bhuwanatala Indah Permai on September 16, 2024 and sell it today you would earn a total of  500.00  from holding Bhuwanatala Indah Permai or generate 18.52% return on investment over 90 days.

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

Bhuwanatala Indah Permai  vs.  Alakasa Industrindo Tbk

Bhuwanatala Indah Permai

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bhuwanatala Indah Permai are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Bhuwanatala Indah disclosed solid returns over the last few months and may actually be approaching a breakup point.

Alakasa Industrindo Tbk

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alakasa Industrindo Tbk are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Alakasa Industrindo may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bhuwanatala Indah and Alakasa Industrindo

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

The idea behind Bhuwanatala Indah Permai and Alakasa Industrindo 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.