Correlation Between Bintang Mitra and Arita Prima

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

By analyzing existing cross correlation between Bintang Mitra Semestaraya and Arita Prima Indonesia, you can compare the effects of market volatilities on Bintang Mitra and Arita 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 Bintang Mitra with a short position of Arita Prima. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bintang Mitra and Arita Prima.

Diversification Opportunities for Bintang Mitra and Arita Prima

0.49

Correlation Coefficient

Bintang Mitra  Arita Prima

Very weak diversification

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

Pair Corralation between Bintang Mitra and Arita Prima

Assuming the 90 days trading horizon Bintang Mitra Semestaraya is expected to under-perform the Arita Prima. But the stock apears to be less risky and, when comparing its historical volatility, Bintang Mitra Semestaraya is 1.17 times less risky than Arita Prima. The stock trades about -0.1 of its potential returns per unit of risk. The Arita Prima Indonesia is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  17,300  in Arita Prima Indonesia on December 2, 2024 and sell it today you would lose (400.00) from holding Arita Prima Indonesia or give up 2.31% of portfolio value over 90 days.

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

Bintang Mitra Semestaraya  vs.  Arita Prima Indonesia

Bintang Mitra Semestaraya

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bintang Mitra Semestaraya 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.

Arita Prima Indonesia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arita Prima Indonesia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Arita Prima 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 Bintang Mitra and Arita Prima

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

The idea behind Bintang Mitra Semestaraya and Arita Prima Indonesia 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.