Correlation Between Panca Budi and Gunung Raja

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

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

Diversification Opportunities for Panca Budi and Gunung Raja

-0.24

Correlation Coefficient

Panca Budi  Gunung Raja

Very good diversification

The 3 months correlation between Panca and Gunung is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Panca Budi Idaman 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 Panca Budi 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 Panca Budi Idaman 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 Panca Budi i.e., Panca Budi and Gunung Raja go up and down completely randomly.

Pair Corralation between Panca Budi and Gunung Raja

Assuming the 90 days trading horizon Panca Budi Idaman is expected to generate 1.2 times more return on investment than Gunung Raja. However, Panca Budi is 1.2 times more volatile than Gunung Raja Paksi. It trades about 0.0 of its potential returns per unit of risk. Gunung Raja Paksi is currently generating about -0.25 per unit of risk. If you would invest  51,500  in Panca Budi Idaman on December 30, 2024 and sell it today you would lose (500.00) from holding Panca Budi Idaman or give up 0.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Panca Budi Idaman  vs.  Gunung Raja Paksi

Panca Budi Idaman

Risk-Adjusted Performance

Very Weak

Over the last 90 days Panca Budi Idaman has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Panca Budi 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 conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Panca Budi and Gunung Raja

The main advantage of trading using opposite Panca Budi and Gunung Raja positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Panca Budi 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 Panca Budi Idaman 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.