Correlation Between Indal Aluminium and Budi Starch

Can any of the company-specific risk be diversified away by investing in both Indal Aluminium and Budi Starch 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 Budi Starch 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 Budi Starch Sweetener, you can compare the effects of market volatilities on Indal Aluminium and Budi Starch 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 Budi Starch. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indal Aluminium and Budi Starch.

Diversification Opportunities for Indal Aluminium and Budi Starch

0.23

Correlation Coefficient

Indal Aluminium  Budi Starch

Modest diversification

The 3 months correlation between Indal and Budi is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Indal Aluminium Industry and Budi Starch Sweetener in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Budi Starch Sweetener 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 Budi Starch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Budi Starch Sweetener has no effect on the direction of Indal Aluminium i.e., Indal Aluminium and Budi Starch go up and down completely randomly.

Pair Corralation between Indal Aluminium and Budi Starch

Assuming the 90 days trading horizon Indal Aluminium Industry is expected to generate 3.06 times more return on investment than Budi Starch. However, Indal Aluminium is 3.06 times more volatile than Budi Starch Sweetener. It trades about 0.02 of its potential returns per unit of risk. Budi Starch Sweetener is currently generating about -0.05 per unit of risk. If you would invest  19,400  in Indal Aluminium Industry on December 2, 2024 and sell it today you would earn a total of  800.00  from holding Indal Aluminium Industry or generate 4.12% return on investment over 90 days.

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

Indal Aluminium Industry  vs.  Budi Starch Sweetener

Indal Aluminium Industry

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Indal Aluminium Industry are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Indal Aluminium disclosed solid returns over the last few months and may actually be approaching a breakup point.

Budi Starch Sweetener

Risk-Adjusted Performance

Very Weak

Over the last 90 days Budi Starch Sweetener 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 April 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 Budi Starch

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

The idea behind Indal Aluminium Industry and Budi Starch Sweetener 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.