Correlation Between Puradelta Lestari and Pakuwon Jati

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

By analyzing existing cross correlation between Puradelta Lestari PT and Pakuwon Jati Tbk, you can compare the effects of market volatilities on Puradelta Lestari and Pakuwon Jati 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 Puradelta Lestari with a short position of Pakuwon Jati. Check out your portfolio center. Please also check ongoing floating volatility patterns of Puradelta Lestari and Pakuwon Jati.

Diversification Opportunities for Puradelta Lestari and Pakuwon Jati

0.58

Correlation Coefficient

Puradelta Lestari  Pakuwon Jati

Very weak diversification

The 3 months correlation between Puradelta and Pakuwon is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Puradelta Lestari PT and Pakuwon Jati Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakuwon Jati Tbk and Puradelta Lestari 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 Puradelta Lestari PT are associated (or correlated) with Pakuwon Jati. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakuwon Jati Tbk has no effect on the direction of Puradelta Lestari i.e., Puradelta Lestari and Pakuwon Jati go up and down completely randomly.

Pair Corralation between Puradelta Lestari and Pakuwon Jati

Assuming the 90 days trading horizon Puradelta Lestari PT is expected to under-perform the Pakuwon Jati. But the stock apears to be less risky and, when comparing its historical volatility, Puradelta Lestari PT is 1.75 times less risky than Pakuwon Jati. The stock trades about -0.01 of its potential returns per unit of risk. The Pakuwon Jati Tbk is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  38,857  in Pakuwon Jati Tbk on September 4, 2024 and sell it today you would earn a total of  1,943  from holding Pakuwon Jati Tbk or generate 5.0% return on investment over 90 days.

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

Puradelta Lestari PT  vs.  Pakuwon Jati Tbk

Puradelta Lestari

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pakuwon Jati Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pakuwon Jati Tbk 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 Puradelta Lestari and Pakuwon Jati

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

The idea behind Puradelta Lestari PT and Pakuwon Jati 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.