Correlation Between Capital Financial and Avia Avian

Can any of the company-specific risk be diversified away by investing in both Capital Financial and Avia Avian 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 Capital Financial and Avia Avian into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Capital Financial Indonesia and Avia Avian PT, you can compare the effects of market volatilities on Capital Financial and Avia Avian 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 Capital Financial with a short position of Avia Avian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Financial and Avia Avian.

Diversification Opportunities for Capital Financial and Avia Avian

-0.15

Correlation Coefficient

Capital Financial  Avia Avian

Good diversification

The 3 months correlation between Capital and Avia is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Capital Financial Indonesia and Avia Avian PT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avia Avian PT and Capital Financial 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 Capital Financial Indonesia are associated (or correlated) with Avia Avian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avia Avian PT has no effect on the direction of Capital Financial i.e., Capital Financial and Avia Avian go up and down completely randomly.

Pair Corralation between Capital Financial and Avia Avian

Assuming the 90 days trading horizon Capital Financial Indonesia is expected to generate 1.11 times more return on investment than Avia Avian. However, Capital Financial is 1.11 times more volatile than Avia Avian PT. It trades about 0.03 of its potential returns per unit of risk. Avia Avian PT is currently generating about -0.09 per unit of risk. If you would invest  49,000  in Capital Financial Indonesia on September 1, 2024 and sell it today you would earn a total of  2,000  from holding Capital Financial Indonesia or generate 4.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.21%
Values	Daily Returns

Capital Financial Indonesia  vs.  Avia Avian PT

Capital Financial

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Financial Indonesia are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Capital Financial is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Avia Avian PT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avia Avian PT 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 Capital Financial and Avia Avian

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

The idea behind Capital Financial Indonesia and Avia Avian PT 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.