Correlation Between Perusahaan Perseroan and China Railway

Can any of the company-specific risk be diversified away by investing in both Perusahaan Perseroan and China Railway 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 Perusahaan Perseroan and China Railway into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Perusahaan Perseroan PT and China Railway Construction, you can compare the effects of market volatilities on Perusahaan Perseroan and China Railway 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 Perusahaan Perseroan with a short position of China Railway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Perusahaan Perseroan and China Railway.

Diversification Opportunities for Perusahaan Perseroan and China Railway

-0.38

Correlation Coefficient

Perusahaan Perseroan  China Railway

Very good diversification

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

Pair Corralation between Perusahaan Perseroan and China Railway

Assuming the 90 days horizon Perusahaan Perseroan PT is expected to under-perform the China Railway. But the stock apears to be less risky and, when comparing its historical volatility, Perusahaan Perseroan PT is 1.28 times less risky than China Railway. The stock trades about -0.04 of its potential returns per unit of risk. The China Railway Construction is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  51.00  in China Railway Construction on September 23, 2024 and sell it today you would earn a total of  13.00  from holding China Railway Construction or generate 25.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.64%
Values	Daily Returns

Perusahaan Perseroan PT  vs.  China Railway Construction

Perusahaan Perseroan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Perusahaan Perseroan PT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

China Railway Constr

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Railway Construction are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, China Railway reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Perusahaan Perseroan and China Railway

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

The idea behind Perusahaan Perseroan PT and China Railway Construction 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.