Correlation Between Resource Alam and Asia Pacific

Can any of the company-specific risk be diversified away by investing in both Resource Alam and Asia Pacific 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 Resource Alam and Asia Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Resource Alam Indonesia and Asia Pacific Fibers, you can compare the effects of market volatilities on Resource Alam and Asia Pacific 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 Resource Alam with a short position of Asia Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Resource Alam and Asia Pacific.

Diversification Opportunities for Resource Alam and Asia Pacific

0.43

Correlation Coefficient

Resource Alam  Asia Pacific

Very weak diversification

The 3 months correlation between Resource and Asia is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Resource Alam Indonesia and Asia Pacific Fibers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Pacific Fibers and Resource Alam 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 Resource Alam Indonesia are associated (or correlated) with Asia Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Pacific Fibers has no effect on the direction of Resource Alam i.e., Resource Alam and Asia Pacific go up and down completely randomly.

Pair Corralation between Resource Alam and Asia Pacific

Assuming the 90 days trading horizon Resource Alam Indonesia is expected to generate 0.55 times more return on investment than Asia Pacific. However, Resource Alam Indonesia is 1.82 times less risky than Asia Pacific. It trades about 0.1 of its potential returns per unit of risk. Asia Pacific Fibers is currently generating about -0.06 per unit of risk. If you would invest  30,810  in Resource Alam Indonesia on October 22, 2024 and sell it today you would earn a total of  18,390  from holding Resource Alam Indonesia or generate 59.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.53%
Values	Daily Returns

Resource Alam Indonesia  vs.  Asia Pacific Fibers

Resource Alam Indonesia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Resource Alam Indonesia 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 February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Asia Pacific Fibers

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Asia Pacific Fibers are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Asia Pacific 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 Resource Alam and Asia Pacific

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

The idea behind Resource Alam Indonesia and Asia Pacific Fibers 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.