Correlation Between Natura City and Bintang Oto

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

By analyzing existing cross correlation between Natura City Developments and Bintang Oto Global, you can compare the effects of market volatilities on Natura City and Bintang Oto 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 Natura City with a short position of Bintang Oto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Natura City and Bintang Oto.

Diversification Opportunities for Natura City and Bintang Oto

-0.75

Correlation Coefficient

Natura City  Bintang Oto

Pay attention - limited upside

The 3 months correlation between Natura and Bintang is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Natura City Developments and Bintang Oto Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bintang Oto Global and Natura City 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 Natura City Developments are associated (or correlated) with Bintang Oto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bintang Oto Global has no effect on the direction of Natura City i.e., Natura City and Bintang Oto go up and down completely randomly.

Pair Corralation between Natura City and Bintang Oto

Assuming the 90 days trading horizon Natura City Developments is expected to generate 2.83 times more return on investment than Bintang Oto. However, Natura City is 2.83 times more volatile than Bintang Oto Global. It trades about 0.13 of its potential returns per unit of risk. Bintang Oto Global is currently generating about -0.23 per unit of risk. If you would invest  8,000  in Natura City Developments on September 13, 2024 and sell it today you would earn a total of  4,900  from holding Natura City Developments or generate 61.25% return on investment over 90 days.

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

Natura City Developments  vs.  Bintang Oto Global

Natura City Developments

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Natura City Developments are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Natura City disclosed solid returns over the last few months and may actually be approaching a breakup point.

Bintang Oto Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bintang Oto Global 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 January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Natura City and Bintang Oto

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

The idea behind Natura City Developments and Bintang Oto Global 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.