Correlation Between Colorpak Indonesia and Budi Starch

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

By analyzing existing cross correlation between Colorpak Indonesia Tbk and Budi Starch Sweetener, you can compare the effects of market volatilities on Colorpak Indonesia and Budi Starch 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 Colorpak Indonesia with a short position of Budi Starch. Check out your portfolio center. Please also check ongoing floating volatility patterns of Colorpak Indonesia and Budi Starch.

Diversification Opportunities for Colorpak Indonesia and Budi Starch

0.36

Correlation Coefficient

Colorpak Indonesia  Budi Starch

Weak diversification

The 3 months correlation between Colorpak and Budi is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Colorpak Indonesia Tbk and Budi Starch Sweetener in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Budi Starch Sweetener and Colorpak Indonesia 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 Colorpak Indonesia Tbk are associated (or correlated) with Budi Starch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Budi Starch Sweetener has no effect on the direction of Colorpak Indonesia i.e., Colorpak Indonesia and Budi Starch go up and down completely randomly.

Pair Corralation between Colorpak Indonesia and Budi Starch

Assuming the 90 days trading horizon Colorpak Indonesia Tbk is expected to under-perform the Budi Starch. But the stock apears to be less risky and, when comparing its historical volatility, Colorpak Indonesia Tbk is 2.29 times less risky than Budi Starch. The stock trades about -0.06 of its potential returns per unit of risk. The Budi Starch Sweetener is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  23,400  in Budi Starch Sweetener on September 3, 2024 and sell it today you would earn a total of  0.00  from holding Budi Starch Sweetener or generate 0.0% return on investment over 90 days.

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

Colorpak Indonesia Tbk  vs.  Budi Starch Sweetener

Colorpak Indonesia Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

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

Budi Starch Sweetener

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Budi Starch Sweetener has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Budi Starch 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 Colorpak Indonesia and Budi Starch

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

The idea behind Colorpak Indonesia Tbk and Budi Starch Sweetener 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.