Correlation Between Paramita Bangun and Indo Kordsa

Can any of the company-specific risk be diversified away by investing in both Paramita Bangun and Indo Kordsa 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 Paramita Bangun and Indo Kordsa into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Paramita Bangun Sarana and Indo Kordsa Tbk, you can compare the effects of market volatilities on Paramita Bangun and Indo Kordsa 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 Paramita Bangun with a short position of Indo Kordsa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Paramita Bangun and Indo Kordsa.

Diversification Opportunities for Paramita Bangun and Indo Kordsa

0.04

Correlation Coefficient

Paramita Bangun  Indo Kordsa

Significant diversification

The 3 months correlation between Paramita and Indo is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Paramita Bangun Sarana and Indo Kordsa Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indo Kordsa Tbk and Paramita Bangun 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 Paramita Bangun Sarana are associated (or correlated) with Indo Kordsa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indo Kordsa Tbk has no effect on the direction of Paramita Bangun i.e., Paramita Bangun and Indo Kordsa go up and down completely randomly.

Pair Corralation between Paramita Bangun and Indo Kordsa

Assuming the 90 days trading horizon Paramita Bangun Sarana is expected to generate 0.91 times more return on investment than Indo Kordsa. However, Paramita Bangun Sarana is 1.1 times less risky than Indo Kordsa. It trades about 0.16 of its potential returns per unit of risk. Indo Kordsa Tbk is currently generating about 0.02 per unit of risk. If you would invest  29,200  in Paramita Bangun Sarana on October 27, 2024 and sell it today you would earn a total of  6,600  from holding Paramita Bangun Sarana or generate 22.6% return on investment over 90 days.

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

Paramita Bangun Sarana  vs.  Indo Kordsa Tbk

Paramita Bangun Sarana

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Paramita Bangun Sarana are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Paramita Bangun disclosed solid returns over the last few months and may actually be approaching a breakup point.

Indo Kordsa Tbk

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Indo Kordsa Tbk are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Indo Kordsa is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Paramita Bangun and Indo Kordsa

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

The idea behind Paramita Bangun Sarana and Indo Kordsa 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..