Correlation Between Pan Brothers and Polychem Indonesia

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

By analyzing existing cross correlation between Pan Brothers Tbk and Polychem Indonesia Tbk, you can compare the effects of market volatilities on Pan Brothers and Polychem Indonesia 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 Pan Brothers with a short position of Polychem Indonesia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pan Brothers and Polychem Indonesia.

Diversification Opportunities for Pan Brothers and Polychem Indonesia

-0.69

Correlation Coefficient

Pan Brothers  Polychem Indonesia

Excellent diversification

The 3 months correlation between Pan and Polychem is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Pan Brothers Tbk and Polychem Indonesia Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polychem Indonesia Tbk and Pan Brothers 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 Pan Brothers Tbk are associated (or correlated) with Polychem Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polychem Indonesia Tbk has no effect on the direction of Pan Brothers i.e., Pan Brothers and Polychem Indonesia go up and down completely randomly.

Pair Corralation between Pan Brothers and Polychem Indonesia

Assuming the 90 days trading horizon Pan Brothers Tbk is expected to generate 1.69 times more return on investment than Polychem Indonesia. However, Pan Brothers is 1.69 times more volatile than Polychem Indonesia Tbk. It trades about 0.1 of its potential returns per unit of risk. Polychem Indonesia Tbk is currently generating about -0.12 per unit of risk. If you would invest  2,000  in Pan Brothers Tbk on September 15, 2024 and sell it today you would earn a total of  300.00  from holding Pan Brothers Tbk or generate 15.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Pan Brothers Tbk  vs.  Polychem Indonesia Tbk

Pan Brothers Tbk

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pan Brothers Tbk are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Pan Brothers disclosed solid returns over the last few months and may actually be approaching a breakup point.

Polychem Indonesia Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Polychem Indonesia Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Pan Brothers and Polychem Indonesia

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

The idea behind Pan Brothers Tbk and Polychem Indonesia Tbk 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.