Correlation Between Optima Prima and IDX 30

Can any of the company-specific risk be diversified away by investing in both Optima Prima and IDX 30 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 IDX 30 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 IDX 30 Jakarta, you can compare the effects of market volatilities on Optima Prima and IDX 30 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 IDX 30. Check out your portfolio center. Please also check ongoing floating volatility patterns of Optima Prima and IDX 30.

Diversification Opportunities for Optima Prima and IDX 30

0.29

Correlation Coefficient

Optima Prima  IDX 30

Modest diversification

The 3 months correlation between Optima and IDX is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Optima Prima Metal and IDX 30 Jakarta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDX 30 Jakarta 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 IDX 30. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDX 30 Jakarta has no effect on the direction of Optima Prima i.e., Optima Prima and IDX 30 go up and down completely randomly.

Pair Corralation between Optima Prima and IDX 30

Assuming the 90 days trading horizon Optima Prima Metal is expected to generate 0.51 times more return on investment than IDX 30. However, Optima Prima Metal is 1.98 times less risky than IDX 30. It trades about 0.0 of its potential returns per unit of risk. IDX 30 Jakarta is currently generating about -0.08 per unit of risk. If you would invest  5,000  in Optima Prima Metal on December 30, 2024 and sell it today you would earn a total of  0.00  from holding Optima Prima Metal or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Optima Prima Metal  vs.  IDX 30 Jakarta

Pair Trading with Optima Prima and IDX 30

The main advantage of trading using opposite Optima Prima and IDX 30 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Optima Prima position performs unexpectedly, IDX 30 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 IDX 30 will offset losses from the drop in IDX 30's long position.

The idea behind Optima Prima Metal and IDX 30 Jakarta 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.