Correlation Between Centratama Telekomunikasi and Alakasa Industrindo

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

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

Diversification Opportunities for Centratama Telekomunikasi and Alakasa Industrindo

0.41

Correlation Coefficient

Centratama Telekomunikasi  Alakasa Industrindo

Very weak diversification

The 3 months correlation between Centratama and Alakasa is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Centratama Telekomunikasi Ind 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 Centratama Telekomunikasi 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 Centratama Telekomunikasi Ind 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 Centratama Telekomunikasi i.e., Centratama Telekomunikasi and Alakasa Industrindo go up and down completely randomly.

Pair Corralation between Centratama Telekomunikasi and Alakasa Industrindo

Assuming the 90 days trading horizon Centratama Telekomunikasi is expected to generate 7.9 times less return on investment than Alakasa Industrindo. But when comparing it to its historical volatility, Centratama Telekomunikasi Ind is 1.0 times less risky than Alakasa Industrindo. It trades about 0.0 of its potential returns per unit of risk. Alakasa Industrindo Tbk is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  38,200  in Alakasa Industrindo Tbk on September 12, 2024 and sell it today you would lose (400.00) from holding Alakasa Industrindo Tbk or give up 1.05% of portfolio value over 90 days.

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

Centratama Telekomunikasi Ind  vs.  Alakasa Industrindo Tbk

Centratama Telekomunikasi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Centratama Telekomunikasi Ind has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Centratama Telekomunikasi is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Alakasa Industrindo Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alakasa Industrindo Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Alakasa Industrindo 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 Centratama Telekomunikasi and Alakasa Industrindo

The main advantage of trading using opposite Centratama Telekomunikasi and Alakasa Industrindo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Centratama Telekomunikasi 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 Centratama Telekomunikasi Ind 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.

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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.