Correlation Between PT Indo and Lima Dua

Can any of the company-specific risk be diversified away by investing in both PT Indo and Lima Dua 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 PT Indo and Lima Dua into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PT Indo Boga and Lima Dua Lima, you can compare the effects of market volatilities on PT Indo and Lima Dua 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 PT Indo with a short position of Lima Dua. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Indo and Lima Dua.

Diversification Opportunities for PT Indo and Lima Dua

-0.77

Correlation Coefficient

PT Indo  Lima Dua

Pay attention - limited upside

The 3 months correlation between IBOS and Lima is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding PT Indo Boga and Lima Dua Lima in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lima Dua Lima and PT Indo 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 PT Indo Boga are associated (or correlated) with Lima Dua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lima Dua Lima has no effect on the direction of PT Indo i.e., PT Indo and Lima Dua go up and down completely randomly.

Pair Corralation between PT Indo and Lima Dua

Assuming the 90 days trading horizon PT Indo Boga is expected to under-perform the Lima Dua. In addition to that, PT Indo is 2.59 times more volatile than Lima Dua Lima. It trades about -0.11 of its total potential returns per unit of risk. Lima Dua Lima is currently generating about -0.01 per unit of volatility. If you would invest  14,200  in Lima Dua Lima on September 14, 2024 and sell it today you would lose (1,500) from holding Lima Dua Lima or give up 10.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.61%
Values	Daily Returns

PT Indo Boga  vs.  Lima Dua Lima

PT Indo Boga

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Indo Boga 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.

Lima Dua Lima

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lima Dua Lima are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Lima Dua disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Indo and Lima Dua

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

The idea behind PT Indo Boga and Lima Dua Lima 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.