Correlation Between PT Chemstar and PT Arkora

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

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

Diversification Opportunities for PT Chemstar and PT Arkora

0.65

Correlation Coefficient

PT Chemstar  PT Arkora

Poor diversification

The 3 months correlation between CHEM and ARKO is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding PT Chemstar Indonesia and PT Arkora Hydro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Arkora Hydro and PT Chemstar 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 PT Chemstar Indonesia are associated (or correlated) with PT Arkora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Arkora Hydro has no effect on the direction of PT Chemstar i.e., PT Chemstar and PT Arkora go up and down completely randomly.

Pair Corralation between PT Chemstar and PT Arkora

Assuming the 90 days trading horizon PT Chemstar is expected to generate 1.08 times less return on investment than PT Arkora. In addition to that, PT Chemstar is 1.31 times more volatile than PT Arkora Hydro. It trades about 0.0 of its total potential returns per unit of risk. PT Arkora Hydro is currently generating about 0.0 per unit of volatility. If you would invest  101,000  in PT Arkora Hydro on October 12, 2024 and sell it today you would lose (8,500) from holding PT Arkora Hydro or give up 8.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.45%
Values	Daily Returns

PT Chemstar Indonesia  vs.  PT Arkora Hydro

PT Chemstar Indonesia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Chemstar Indonesia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

PT Arkora Hydro

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Arkora Hydro has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with PT Chemstar and PT Arkora

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

The idea behind PT Chemstar Indonesia and PT Arkora Hydro 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.