Correlation Between Bima Sakti and Grand House

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

By analyzing existing cross correlation between Bima Sakti Pertiwi and Grand House Mulia, you can compare the effects of market volatilities on Bima Sakti and Grand House 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 Bima Sakti with a short position of Grand House. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bima Sakti and Grand House.

Diversification Opportunities for Bima Sakti and Grand House

-0.38

Correlation Coefficient

Bima Sakti  Grand House

Very good diversification

The 3 months correlation between Bima and Grand is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Bima Sakti Pertiwi and Grand House Mulia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grand House Mulia and Bima Sakti 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 Bima Sakti Pertiwi are associated (or correlated) with Grand House. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grand House Mulia has no effect on the direction of Bima Sakti i.e., Bima Sakti and Grand House go up and down completely randomly.

Pair Corralation between Bima Sakti and Grand House

Assuming the 90 days trading horizon Bima Sakti Pertiwi is expected to under-perform the Grand House. But the stock apears to be less risky and, when comparing its historical volatility, Bima Sakti Pertiwi is 5.45 times less risky than Grand House. The stock trades about -0.01 of its potential returns per unit of risk. The Grand House Mulia is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  13,700  in Grand House Mulia on August 31, 2024 and sell it today you would earn a total of  22,900  from holding Grand House Mulia or generate 167.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Bima Sakti Pertiwi  vs.  Grand House Mulia

Bima Sakti Pertiwi

Risk-Adjusted Performance

0 of 100

Very Weak

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

Grand House Mulia

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Grand House Mulia are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Grand House disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bima Sakti and Grand House

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

The idea behind Bima Sakti Pertiwi and Grand House Mulia 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.