Correlation Between Lumia and PT Gajah

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

By analyzing existing cross correlation between Lumia and PT Gajah Tunggal, you can compare the effects of market volatilities on Lumia and PT Gajah 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 Lumia with a short position of PT Gajah. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lumia and PT Gajah.

Diversification Opportunities for Lumia and PT Gajah

-0.32

Correlation Coefficient

Lumia  PT Gajah

Very good diversification

The 3 months correlation between Lumia and GH8 is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and PT Gajah Tunggal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Gajah Tunggal and Lumia 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 Lumia are associated (or correlated) with PT Gajah. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Gajah Tunggal has no effect on the direction of Lumia i.e., Lumia and PT Gajah go up and down completely randomly.

Pair Corralation between Lumia and PT Gajah

Assuming the 90 days trading horizon Lumia is expected to generate 4.41 times more return on investment than PT Gajah. However, Lumia is 4.41 times more volatile than PT Gajah Tunggal. It trades about 0.04 of its potential returns per unit of risk. PT Gajah Tunggal is currently generating about 0.07 per unit of risk. If you would invest  0.00  in Lumia on October 11, 2024 and sell it today you would earn a total of  120.00  from holding Lumia or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.66%
Values	Daily Returns

Lumia  vs.  PT Gajah Tunggal

Lumia

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lumia are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Lumia exhibited solid returns over the last few months and may actually be approaching a breakup point.

PT Gajah Tunggal

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PT Gajah Tunggal are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PT Gajah reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lumia and PT Gajah

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

The idea behind Lumia and PT Gajah Tunggal 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.

Check out your portfolio center.

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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.