Correlation Between Optima Prima and Gunung Raja

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

By analyzing existing cross correlation between Optima Prima Metal and Gunung Raja Paksi, you can compare the effects of market volatilities on Optima Prima and Gunung Raja 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 Optima Prima with a short position of Gunung Raja. Check out your portfolio center. Please also check ongoing floating volatility patterns of Optima Prima and Gunung Raja.

Diversification Opportunities for Optima Prima and Gunung Raja

0.14

Correlation Coefficient

Optima Prima  Gunung Raja

Average diversification

The 3 months correlation between Optima and Gunung is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Optima Prima Metal and Gunung Raja Paksi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gunung Raja Paksi and Optima Prima 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 Optima Prima Metal are associated (or correlated) with Gunung Raja. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gunung Raja Paksi has no effect on the direction of Optima Prima i.e., Optima Prima and Gunung Raja go up and down completely randomly.

Pair Corralation between Optima Prima and Gunung Raja

Assuming the 90 days trading horizon Optima Prima Metal is expected to generate 0.37 times more return on investment than Gunung Raja. However, Optima Prima Metal is 2.7 times less risky than Gunung Raja. It trades about -0.11 of its potential returns per unit of risk. Gunung Raja Paksi is currently generating about -0.28 per unit of risk. If you would invest  5,200  in Optima Prima Metal on December 2, 2024 and sell it today you would lose (200.00) from holding Optima Prima Metal or give up 3.85% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.5%
Values	Daily Returns

Optima Prima Metal  vs.  Gunung Raja Paksi

Optima Prima Metal

Risk-Adjusted Performance

Very Weak

Over the last 90 days Optima Prima Metal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Optima Prima is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Gunung Raja Paksi

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gunung Raja Paksi has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Gunung Raja 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 Optima Prima and Gunung Raja

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

The idea behind Optima Prima Metal and Gunung Raja Paksi 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..