Correlation Between Ramayana Lestari and Ace Hardware

Can any of the company-specific risk be diversified away by investing in both Ramayana Lestari and Ace Hardware 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 Ramayana Lestari and Ace Hardware into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ramayana Lestari Sentosa and Ace Hardware Indonesia, you can compare the effects of market volatilities on Ramayana Lestari and Ace Hardware 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 Ramayana Lestari with a short position of Ace Hardware. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ramayana Lestari and Ace Hardware.

Diversification Opportunities for Ramayana Lestari and Ace Hardware

0.44

Correlation Coefficient

Ramayana Lestari  Ace Hardware

Very weak diversification

The 3 months correlation between Ramayana and Ace is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Ramayana Lestari Sentosa and Ace Hardware Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ace Hardware Indonesia and Ramayana Lestari 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 Ramayana Lestari Sentosa are associated (or correlated) with Ace Hardware. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ace Hardware Indonesia has no effect on the direction of Ramayana Lestari i.e., Ramayana Lestari and Ace Hardware go up and down completely randomly.

Pair Corralation between Ramayana Lestari and Ace Hardware

Assuming the 90 days trading horizon Ramayana Lestari Sentosa is expected to generate 0.58 times more return on investment than Ace Hardware. However, Ramayana Lestari Sentosa is 1.72 times less risky than Ace Hardware. It trades about 0.05 of its potential returns per unit of risk. Ace Hardware Indonesia is currently generating about -0.08 per unit of risk. If you would invest  38,200  in Ramayana Lestari Sentosa on September 12, 2024 and sell it today you would earn a total of  400.00  from holding Ramayana Lestari Sentosa or generate 1.05% return on investment over 90 days.

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

Ramayana Lestari Sentosa  vs.  Ace Hardware Indonesia

Ramayana Lestari Sentosa

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ramayana Lestari Sentosa has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Ramayana Lestari is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Ace Hardware Indonesia

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ace Hardware Indonesia are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Ace Hardware may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ramayana Lestari and Ace Hardware

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

The idea behind Ramayana Lestari Sentosa and Ace Hardware Indonesia 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.