Correlation Between IDX 30 and Panin Financial

Can any of the company-specific risk be diversified away by investing in both IDX 30 and Panin Financial 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 Panin Financial 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 Panin Financial Tbk, you can compare the effects of market volatilities on IDX 30 and Panin Financial 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 Panin Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of IDX 30 and Panin Financial.

Diversification Opportunities for IDX 30 and Panin Financial

0.96

Correlation Coefficient

IDX 30  Panin Financial

Almost no diversification

The 3 months correlation between IDX and Panin is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding IDX 30 Jakarta and Panin Financial Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Panin Financial Tbk 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 Panin Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Panin Financial Tbk has no effect on the direction of IDX 30 i.e., IDX 30 and Panin Financial go up and down completely randomly.

Pair Corralation between IDX 30 and Panin Financial

Assuming the 90 days trading horizon IDX 30 Jakarta is expected to generate 0.53 times more return on investment than Panin Financial. However, IDX 30 Jakarta is 1.87 times less risky than Panin Financial. It trades about -0.08 of its potential returns per unit of risk. Panin Financial Tbk is currently generating about -0.06 per unit of risk. If you would invest  42,348  in IDX 30 Jakarta on December 30, 2024 and sell it today you would lose (3,662) from holding IDX 30 Jakarta or give up 8.65% of portfolio value over 90 days.

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

IDX 30 Jakarta  vs.  Panin Financial Tbk

Pair Trading with IDX 30 and Panin Financial

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

The idea behind IDX 30 Jakarta and Panin Financial Tbk 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.