Correlation Between IDX 30 and Pratama Abadi

Can any of the company-specific risk be diversified away by investing in both IDX 30 and Pratama Abadi 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 IDX 30 and Pratama Abadi into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between IDX 30 Jakarta and Pratama Abadi Nusa, you can compare the effects of market volatilities on IDX 30 and Pratama Abadi 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 IDX 30 with a short position of Pratama Abadi. Check out your portfolio center. Please also check ongoing floating volatility patterns of IDX 30 and Pratama Abadi.

Diversification Opportunities for IDX 30 and Pratama Abadi

-0.5

Correlation Coefficient

IDX 30  Pratama Abadi

Very good diversification

The 3 months correlation between IDX and Pratama is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding IDX 30 Jakarta and Pratama Abadi Nusa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pratama Abadi Nusa and IDX 30 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 IDX 30 Jakarta are associated (or correlated) with Pratama Abadi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pratama Abadi Nusa has no effect on the direction of IDX 30 i.e., IDX 30 and Pratama Abadi go up and down completely randomly.

Pair Corralation between IDX 30 and Pratama Abadi

Assuming the 90 days trading horizon IDX 30 Jakarta is expected to under-perform the Pratama Abadi. But the index apears to be less risky and, when comparing its historical volatility, IDX 30 Jakarta is 2.3 times less risky than Pratama Abadi. The index trades about -0.13 of its potential returns per unit of risk. The Pratama Abadi Nusa is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,590,000  in Pratama Abadi Nusa on October 17, 2024 and sell it today you would lose (10,000) from holding Pratama Abadi Nusa or give up 0.63% of portfolio value over 90 days.

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

IDX 30 Jakarta  vs.  Pratama Abadi Nusa

Pair Trading with IDX 30 and Pratama Abadi

The main advantage of trading using opposite IDX 30 and Pratama Abadi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IDX 30 position performs unexpectedly, Pratama Abadi 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 Pratama Abadi will offset losses from the drop in Pratama Abadi's long position.

The idea behind IDX 30 Jakarta and Pratama Abadi Nusa 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.