Correlation Between Buyung Poetra and Puradelta Lestari

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

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

Diversification Opportunities for Buyung Poetra and Puradelta Lestari

-0.08

Correlation Coefficient

Buyung Poetra  Puradelta Lestari

Good diversification

The 3 months correlation between Buyung and Puradelta is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Buyung Poetra Sembada and Puradelta Lestari PT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Puradelta Lestari and Buyung Poetra 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 Buyung Poetra Sembada are associated (or correlated) with Puradelta Lestari. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Puradelta Lestari has no effect on the direction of Buyung Poetra i.e., Buyung Poetra and Puradelta Lestari go up and down completely randomly.

Pair Corralation between Buyung Poetra and Puradelta Lestari

Assuming the 90 days trading horizon Buyung Poetra Sembada is expected to generate 4.35 times more return on investment than Puradelta Lestari. However, Buyung Poetra is 4.35 times more volatile than Puradelta Lestari PT. It trades about 0.02 of its potential returns per unit of risk. Puradelta Lestari PT is currently generating about -0.1 per unit of risk. If you would invest  12,200  in Buyung Poetra Sembada on September 15, 2024 and sell it today you would earn a total of  100.00  from holding Buyung Poetra Sembada or generate 0.82% return on investment over 90 days.

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

Buyung Poetra Sembada  vs.  Puradelta Lestari PT

Buyung Poetra Sembada

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Buyung Poetra Sembada are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Buyung Poetra is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

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.

Pair Trading with Buyung Poetra and Puradelta Lestari

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

The idea behind Buyung Poetra Sembada and Puradelta Lestari PT 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.