Correlation Between Pudjiadi Sons and Pan Brothers

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

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

Diversification Opportunities for Pudjiadi Sons and Pan Brothers

0.5

Correlation Coefficient

Pudjiadi Sons  Pan Brothers

Very weak diversification

The 3 months correlation between Pudjiadi and Pan is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Pudjiadi Sons Tbk and Pan Brothers Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pan Brothers Tbk and Pudjiadi Sons 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 Pudjiadi Sons Tbk are associated (or correlated) with Pan Brothers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pan Brothers Tbk has no effect on the direction of Pudjiadi Sons i.e., Pudjiadi Sons and Pan Brothers go up and down completely randomly.

Pair Corralation between Pudjiadi Sons and Pan Brothers

Assuming the 90 days trading horizon Pudjiadi Sons Tbk is expected to generate 4.82 times more return on investment than Pan Brothers. However, Pudjiadi Sons is 4.82 times more volatile than Pan Brothers Tbk. It trades about 0.1 of its potential returns per unit of risk. Pan Brothers Tbk is currently generating about 0.17 per unit of risk. If you would invest  45,400  in Pudjiadi Sons Tbk on October 11, 2024 and sell it today you would earn a total of  17,600  from holding Pudjiadi Sons Tbk or generate 38.77% return on investment over 90 days.

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

Pudjiadi Sons Tbk  vs.  Pan Brothers Tbk

Pudjiadi Sons Tbk

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pudjiadi Sons Tbk are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Pudjiadi Sons disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pan Brothers Tbk

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pan Brothers Tbk are ranked lower than 13 (%) 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.

Pair Trading with Pudjiadi Sons and Pan Brothers

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

The idea behind Pudjiadi Sons Tbk and Pan Brothers 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.