Correlation Between Wilmar Cahaya and Austindo Nusantara

Can any of the company-specific risk be diversified away by investing in both Wilmar Cahaya and Austindo Nusantara 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 Wilmar Cahaya and Austindo Nusantara into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Wilmar Cahaya Indonesia and Austindo Nusantara Jaya, you can compare the effects of market volatilities on Wilmar Cahaya and Austindo Nusantara 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 Wilmar Cahaya with a short position of Austindo Nusantara. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wilmar Cahaya and Austindo Nusantara.

Diversification Opportunities for Wilmar Cahaya and Austindo Nusantara

0.35

Correlation Coefficient

Wilmar Cahaya  Austindo Nusantara

Weak diversification

The 3 months correlation between Wilmar and Austindo is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Wilmar Cahaya Indonesia and Austindo Nusantara Jaya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Austindo Nusantara Jaya and Wilmar Cahaya 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 Wilmar Cahaya Indonesia are associated (or correlated) with Austindo Nusantara. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Austindo Nusantara Jaya has no effect on the direction of Wilmar Cahaya i.e., Wilmar Cahaya and Austindo Nusantara go up and down completely randomly.

Pair Corralation between Wilmar Cahaya and Austindo Nusantara

Assuming the 90 days trading horizon Wilmar Cahaya is expected to generate 50.19 times less return on investment than Austindo Nusantara. But when comparing it to its historical volatility, Wilmar Cahaya Indonesia is 2.58 times less risky than Austindo Nusantara. It trades about 0.02 of its potential returns per unit of risk. Austindo Nusantara Jaya is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  71,500  in Austindo Nusantara Jaya on December 30, 2024 and sell it today you would earn a total of  88,500  from holding Austindo Nusantara Jaya or generate 123.78% return on investment over 90 days.

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

Wilmar Cahaya Indonesia  vs.  Austindo Nusantara Jaya

Wilmar Cahaya Indonesia

Risk-Adjusted Performance

Weak

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

Austindo Nusantara Jaya

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Austindo Nusantara Jaya are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Austindo Nusantara disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wilmar Cahaya and Austindo Nusantara

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

The idea behind Wilmar Cahaya Indonesia and Austindo Nusantara Jaya 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.