Correlation Between Communication Cable and PT Wahana

Can any of the company-specific risk be diversified away by investing in both Communication Cable and PT Wahana 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 Communication Cable and PT Wahana into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Communication Cable Systems and PT Wahana Interfood, you can compare the effects of market volatilities on Communication Cable and PT Wahana 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 Communication Cable with a short position of PT Wahana. Check out your portfolio center. Please also check ongoing floating volatility patterns of Communication Cable and PT Wahana.

Diversification Opportunities for Communication Cable and PT Wahana

0.38

Correlation Coefficient

Communication Cable  PT Wahana

Weak diversification

The 3 months correlation between Communication and COCO is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Communication Cable Systems and PT Wahana Interfood in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Wahana Interfood and Communication Cable 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 Communication Cable Systems are associated (or correlated) with PT Wahana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Wahana Interfood has no effect on the direction of Communication Cable i.e., Communication Cable and PT Wahana go up and down completely randomly.

Pair Corralation between Communication Cable and PT Wahana

Assuming the 90 days trading horizon Communication Cable Systems is expected to generate 2.74 times more return on investment than PT Wahana. However, Communication Cable is 2.74 times more volatile than PT Wahana Interfood. It trades about -0.04 of its potential returns per unit of risk. PT Wahana Interfood is currently generating about -0.12 per unit of risk. If you would invest  29,600  in Communication Cable Systems on September 3, 2024 and sell it today you would lose (4,200) from holding Communication Cable Systems or give up 14.19% of portfolio value over 90 days.

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

Communication Cable Systems  vs.  PT Wahana Interfood

Communication Cable

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Communication Cable Systems 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.

PT Wahana Interfood

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Wahana Interfood 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 Communication Cable and PT Wahana

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

The idea behind Communication Cable Systems and PT Wahana Interfood 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.