Correlation Between Alfa Energi and Buana Listya

Can any of the company-specific risk be diversified away by investing in both Alfa Energi and Buana Listya 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 Alfa Energi and Buana Listya into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alfa Energi Investama and Buana Listya Tama, you can compare the effects of market volatilities on Alfa Energi and Buana Listya 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 Alfa Energi with a short position of Buana Listya. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alfa Energi and Buana Listya.

Diversification Opportunities for Alfa Energi and Buana Listya

0.67

Correlation Coefficient

Alfa Energi  Buana Listya

Poor diversification

The 3 months correlation between Alfa and Buana is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Alfa Energi Investama and Buana Listya Tama in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Buana Listya Tama and Alfa Energi 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 Alfa Energi Investama are associated (or correlated) with Buana Listya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Buana Listya Tama has no effect on the direction of Alfa Energi i.e., Alfa Energi and Buana Listya go up and down completely randomly.

Pair Corralation between Alfa Energi and Buana Listya

Assuming the 90 days trading horizon Alfa Energi Investama is expected to under-perform the Buana Listya. But the stock apears to be less risky and, when comparing its historical volatility, Alfa Energi Investama is 1.45 times less risky than Buana Listya. The stock trades about -0.13 of its potential returns per unit of risk. The Buana Listya Tama is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  12,200  in Buana Listya Tama on September 18, 2024 and sell it today you would lose (200.00) from holding Buana Listya Tama or give up 1.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Alfa Energi Investama  vs.  Buana Listya Tama

Alfa Energi Investama

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alfa Energi Investama 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.

Buana Listya Tama

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Buana Listya Tama has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Buana Listya 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 Alfa Energi and Buana Listya

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

The idea behind Alfa Energi Investama and Buana Listya Tama 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.