Correlation Between Indonesian Tobacco and Dunia Virtual

Can any of the company-specific risk be diversified away by investing in both Indonesian Tobacco and Dunia Virtual 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 Indonesian Tobacco and Dunia Virtual into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Indonesian Tobacco Tbk and Dunia Virtual Online, you can compare the effects of market volatilities on Indonesian Tobacco and Dunia Virtual 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 Indonesian Tobacco with a short position of Dunia Virtual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indonesian Tobacco and Dunia Virtual.

Diversification Opportunities for Indonesian Tobacco and Dunia Virtual

0.55

Correlation Coefficient

Indonesian Tobacco  Dunia Virtual

Very weak diversification

The 3 months correlation between Indonesian and Dunia is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Indonesian Tobacco Tbk and Dunia Virtual Online in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dunia Virtual Online and Indonesian Tobacco 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 Indonesian Tobacco Tbk are associated (or correlated) with Dunia Virtual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dunia Virtual Online has no effect on the direction of Indonesian Tobacco i.e., Indonesian Tobacco and Dunia Virtual go up and down completely randomly.

Pair Corralation between Indonesian Tobacco and Dunia Virtual

Assuming the 90 days trading horizon Indonesian Tobacco Tbk is expected to generate 0.49 times more return on investment than Dunia Virtual. However, Indonesian Tobacco Tbk is 2.06 times less risky than Dunia Virtual. It trades about -0.07 of its potential returns per unit of risk. Dunia Virtual Online is currently generating about -0.06 per unit of risk. If you would invest  27,000  in Indonesian Tobacco Tbk on October 25, 2024 and sell it today you would lose (1,800) from holding Indonesian Tobacco Tbk or give up 6.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Indonesian Tobacco Tbk  vs.  Dunia Virtual Online

Indonesian Tobacco Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indonesian Tobacco Tbk 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.

Dunia Virtual Online

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dunia Virtual Online 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.

Pair Trading with Indonesian Tobacco and Dunia Virtual

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

The idea behind Indonesian Tobacco Tbk and Dunia Virtual Online 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.