Correlation Between Jakarta Int and Panca Budi

Can any of the company-specific risk be diversified away by investing in both Jakarta Int and Panca Budi 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 Jakarta Int and Panca Budi into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jakarta Int Hotels and Panca Budi Idaman, you can compare the effects of market volatilities on Jakarta Int and Panca Budi 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 Jakarta Int with a short position of Panca Budi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jakarta Int and Panca Budi.

Diversification Opportunities for Jakarta Int and Panca Budi

0.74

Correlation Coefficient

Jakarta Int  Panca Budi

Poor diversification

The 3 months correlation between Jakarta and Panca is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Jakarta Int Hotels and Panca Budi Idaman in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Panca Budi Idaman and Jakarta Int 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 Jakarta Int Hotels are associated (or correlated) with Panca Budi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Panca Budi Idaman has no effect on the direction of Jakarta Int i.e., Jakarta Int and Panca Budi go up and down completely randomly.

Pair Corralation between Jakarta Int and Panca Budi

Assuming the 90 days trading horizon Jakarta Int is expected to generate 4.54 times less return on investment than Panca Budi. But when comparing it to its historical volatility, Jakarta Int Hotels is 11.4 times less risky than Panca Budi. It trades about 0.11 of its potential returns per unit of risk. Panca Budi Idaman is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  33,959  in Panca Budi Idaman on September 5, 2024 and sell it today you would earn a total of  18,541  from holding Panca Budi Idaman or generate 54.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

Jakarta Int Hotels  vs.  Panca Budi Idaman

Jakarta Int Hotels

Risk-Adjusted Performance

23 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Jakarta Int Hotels are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Jakarta Int disclosed solid returns over the last few months and may actually be approaching a breakup point.

Panca Budi Idaman

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Panca Budi Idaman are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Panca Budi disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jakarta Int and Panca Budi

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

The idea behind Jakarta Int Hotels and Panca Budi Idaman 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.