Correlation Between First Media and Buana Listya

Can any of the company-specific risk be diversified away by investing in both First Media and Buana Listya 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 First Media and Buana Listya into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First Media Tbk and Buana Listya Tama, you can compare the effects of market volatilities on First Media and Buana Listya 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 First Media with a short position of Buana Listya. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Media and Buana Listya.

Diversification Opportunities for First Media and Buana Listya

-0.83

Correlation Coefficient

First Media  Buana Listya

Pay attention - limited upside

The 3 months correlation between First and Buana is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding First Media Tbk and Buana Listya Tama in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Buana Listya Tama and First Media 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 First Media Tbk are associated (or correlated) with Buana Listya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Buana Listya Tama has no effect on the direction of First Media i.e., First Media and Buana Listya go up and down completely randomly.

Pair Corralation between First Media and Buana Listya

Assuming the 90 days trading horizon First Media Tbk is expected to generate 0.71 times more return on investment than Buana Listya. However, First Media Tbk is 1.4 times less risky than Buana Listya. It trades about 0.07 of its potential returns per unit of risk. Buana Listya Tama is currently generating about 0.0 per unit of risk. If you would invest  7,600  in First Media Tbk on October 25, 2024 and sell it today you would earn a total of  700.00  from holding First Media Tbk or generate 9.21% return on investment over 90 days.

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

First Media Tbk  vs.  Buana Listya Tama

First Media Tbk

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Media Tbk are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, First Media may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Buana Listya Tama

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Buana Listya Tama has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Buana Listya 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 First Media and Buana Listya

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

The idea behind First Media Tbk and Buana Listya Tama 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 Stocks Directory module to find actively traded stocks across global markets.