Correlation Between Centratama Telekomunikasi and Bayu Buana

Can any of the company-specific risk be diversified away by investing in both Centratama Telekomunikasi and Bayu Buana 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 Bayu Buana 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 Bayu Buana Tbk, you can compare the effects of market volatilities on Centratama Telekomunikasi and Bayu Buana 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 Bayu Buana. Check out your portfolio center. Please also check ongoing floating volatility patterns of Centratama Telekomunikasi and Bayu Buana.

Diversification Opportunities for Centratama Telekomunikasi and Bayu Buana

0.47

Correlation Coefficient

Centratama Telekomunikasi  Bayu Buana

Very weak diversification

The 3 months correlation between Centratama and Bayu is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Centratama Telekomunikasi Ind and Bayu Buana Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayu Buana 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 Bayu Buana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayu Buana Tbk has no effect on the direction of Centratama Telekomunikasi i.e., Centratama Telekomunikasi and Bayu Buana go up and down completely randomly.

Pair Corralation between Centratama Telekomunikasi and Bayu Buana

Assuming the 90 days trading horizon Centratama Telekomunikasi Ind is expected to generate 3.12 times more return on investment than Bayu Buana. However, Centratama Telekomunikasi is 3.12 times more volatile than Bayu Buana Tbk. It trades about 0.0 of its potential returns per unit of risk. Bayu Buana Tbk is currently generating about -0.01 per unit of risk. If you would invest  5,000  in Centratama Telekomunikasi Ind on September 12, 2024 and sell it today you would lose (200.00) from holding Centratama Telekomunikasi Ind or give up 4.0% 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.  Bayu Buana 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.

Bayu Buana Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Centratama Telekomunikasi Ind and Bayu Buana 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.

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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.