Correlation Between PT Citra and Electronic City

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

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

Diversification Opportunities for PT Citra and Electronic City

0.78

Correlation Coefficient

PT Citra  Electronic City

Poor diversification

The 3 months correlation between CTBN and Electronic is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding PT Citra Tubindo and Electronic City Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic City Indonesia and PT Citra 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 Citra Tubindo are associated (or correlated) with Electronic City. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electronic City Indonesia has no effect on the direction of PT Citra i.e., PT Citra and Electronic City go up and down completely randomly.

Pair Corralation between PT Citra and Electronic City

Assuming the 90 days trading horizon PT Citra is expected to generate 2.28 times less return on investment than Electronic City. But when comparing it to its historical volatility, PT Citra Tubindo is 3.81 times less risky than Electronic City. It trades about 0.51 of its potential returns per unit of risk. Electronic City Indonesia is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  16,400  in Electronic City Indonesia on September 13, 2024 and sell it today you would earn a total of  15,200  from holding Electronic City Indonesia or generate 92.68% return on investment over 90 days.

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

PT Citra Tubindo  vs.  Electronic City Indonesia

PT Citra Tubindo

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PT Citra Tubindo are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, PT Citra disclosed solid returns over the last few months and may actually be approaching a breakup point.

Electronic City Indonesia

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Electronic City Indonesia are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Electronic City disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Citra and Electronic City

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

The idea behind PT Citra Tubindo and Electronic City Indonesia 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 Anywhere module to track or share privately all of your investments from the convenience of any device.