Correlation Between Indal Aluminium and Alumindo Light

Can any of the company-specific risk be diversified away by investing in both Indal Aluminium and Alumindo Light 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 Indal Aluminium and Alumindo Light into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Indal Aluminium Industry and Alumindo Light Metal, you can compare the effects of market volatilities on Indal Aluminium and Alumindo Light 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 Indal Aluminium with a short position of Alumindo Light. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indal Aluminium and Alumindo Light.

Diversification Opportunities for Indal Aluminium and Alumindo Light

0.09

Correlation Coefficient

Indal Aluminium  Alumindo Light

Significant diversification

The 3 months correlation between Indal and Alumindo is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Indal Aluminium Industry and Alumindo Light Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alumindo Light Metal and Indal Aluminium 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 Indal Aluminium Industry are associated (or correlated) with Alumindo Light. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alumindo Light Metal has no effect on the direction of Indal Aluminium i.e., Indal Aluminium and Alumindo Light go up and down completely randomly.

Pair Corralation between Indal Aluminium and Alumindo Light

Assuming the 90 days trading horizon Indal Aluminium Industry is expected to generate 0.71 times more return on investment than Alumindo Light. However, Indal Aluminium Industry is 1.42 times less risky than Alumindo Light. It trades about -0.06 of its potential returns per unit of risk. Alumindo Light Metal is currently generating about -0.08 per unit of risk. If you would invest  14,800  in Indal Aluminium Industry on September 5, 2024 and sell it today you would lose (1,700) from holding Indal Aluminium Industry or give up 11.49% of portfolio value over 90 days.

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

Indal Aluminium Industry  vs.  Alumindo Light Metal

Indal Aluminium Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indal Aluminium Industry has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Alumindo Light Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alumindo Light Metal 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.

Pair Trading with Indal Aluminium and Alumindo Light

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

The idea behind Indal Aluminium Industry and Alumindo Light Metal 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.