Correlation Between Eastparc Hotel and Arkadia Digital

Can any of the company-specific risk be diversified away by investing in both Eastparc Hotel and Arkadia Digital 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 Eastparc Hotel and Arkadia Digital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Eastparc Hotel Tbk and Arkadia Digital Media, you can compare the effects of market volatilities on Eastparc Hotel and Arkadia Digital 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 Eastparc Hotel with a short position of Arkadia Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastparc Hotel and Arkadia Digital.

Diversification Opportunities for Eastparc Hotel and Arkadia Digital

0.65

Correlation Coefficient

Eastparc Hotel  Arkadia Digital

Poor diversification

The 3 months correlation between Eastparc and Arkadia is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Eastparc Hotel Tbk and Arkadia Digital Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arkadia Digital Media and Eastparc Hotel 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 Eastparc Hotel Tbk are associated (or correlated) with Arkadia Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arkadia Digital Media has no effect on the direction of Eastparc Hotel i.e., Eastparc Hotel and Arkadia Digital go up and down completely randomly.

Pair Corralation between Eastparc Hotel and Arkadia Digital

Assuming the 90 days trading horizon Eastparc Hotel Tbk is expected to under-perform the Arkadia Digital. But the stock apears to be less risky and, when comparing its historical volatility, Eastparc Hotel Tbk is 1.72 times less risky than Arkadia Digital. The stock trades about -0.04 of its potential returns per unit of risk. The Arkadia Digital Media is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,600  in Arkadia Digital Media on September 14, 2024 and sell it today you would lose (100.00) from holding Arkadia Digital Media or give up 6.25% of portfolio value over 90 days.

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

Eastparc Hotel Tbk  vs.  Arkadia Digital Media

Eastparc Hotel Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

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

Arkadia Digital Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arkadia Digital Media has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Arkadia Digital 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 Eastparc Hotel and Arkadia Digital

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

The idea behind Eastparc Hotel Tbk and Arkadia Digital Media 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.