Correlation Between Diamond Food and Pt Pradiksi

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

By analyzing existing cross correlation between Diamond Food Indonesia and Pt Pradiksi Gunatama, you can compare the effects of market volatilities on Diamond Food and Pt Pradiksi 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 Diamond Food with a short position of Pt Pradiksi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Food and Pt Pradiksi.

Diversification Opportunities for Diamond Food and Pt Pradiksi

0.24

Correlation Coefficient

Diamond Food  Pt Pradiksi

Modest diversification

The 3 months correlation between Diamond and PGUN is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Food Indonesia and Pt Pradiksi Gunatama in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pt Pradiksi Gunatama and Diamond Food 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 Diamond Food Indonesia are associated (or correlated) with Pt Pradiksi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pt Pradiksi Gunatama has no effect on the direction of Diamond Food i.e., Diamond Food and Pt Pradiksi go up and down completely randomly.

Pair Corralation between Diamond Food and Pt Pradiksi

Assuming the 90 days trading horizon Diamond Food Indonesia is expected to under-perform the Pt Pradiksi. In addition to that, Diamond Food is 2.93 times more volatile than Pt Pradiksi Gunatama. It trades about -0.04 of its total potential returns per unit of risk. Pt Pradiksi Gunatama is currently generating about -0.08 per unit of volatility. If you would invest  43,600  in Pt Pradiksi Gunatama on September 13, 2024 and sell it today you would lose (1,200) from holding Pt Pradiksi Gunatama or give up 2.75% of portfolio value over 90 days.

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

Diamond Food Indonesia  vs.  Pt Pradiksi Gunatama

Diamond Food Indonesia

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pt Pradiksi Gunatama

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pt Pradiksi Gunatama has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Pt Pradiksi 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 Diamond Food and Pt Pradiksi

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

The idea behind Diamond Food Indonesia and Pt Pradiksi Gunatama 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.