Correlation Between Indal Aluminium and Lionmesh Prima

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

Diversification Opportunities for Indal Aluminium and Lionmesh Prima

0.07

Correlation Coefficient

Indal Aluminium  Lionmesh Prima

Significant diversification

The 3 months correlation between Indal and Lionmesh is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Indal Aluminium Industry and Lionmesh Prima Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lionmesh Prima Tbk 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 Lionmesh Prima. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lionmesh Prima Tbk has no effect on the direction of Indal Aluminium i.e., Indal Aluminium and Lionmesh Prima go up and down completely randomly.

Pair Corralation between Indal Aluminium and Lionmesh Prima

Assuming the 90 days trading horizon Indal Aluminium Industry is expected to under-perform the Lionmesh Prima. But the stock apears to be less risky and, when comparing its historical volatility, Indal Aluminium Industry is 1.11 times less risky than Lionmesh Prima. The stock trades about -0.04 of its potential returns per unit of risk. The Lionmesh Prima Tbk is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  39,800  in Lionmesh Prima Tbk on September 4, 2024 and sell it today you would lose (1,600) from holding Lionmesh Prima Tbk or give up 4.02% 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.  Lionmesh Prima Tbk

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.

Lionmesh Prima Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lionmesh Prima Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Lionmesh Prima is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Indal Aluminium and Lionmesh Prima

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

The idea behind Indal Aluminium Industry and Lionmesh Prima 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.