Correlation Between Tower Bersama and Pabrik Kertas

Can any of the company-specific risk be diversified away by investing in both Tower Bersama and Pabrik Kertas 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 Tower Bersama and Pabrik Kertas into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tower Bersama Infrastructure and Pabrik Kertas Tjiwi, you can compare the effects of market volatilities on Tower Bersama and Pabrik Kertas 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 Tower Bersama with a short position of Pabrik Kertas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tower Bersama and Pabrik Kertas.

Diversification Opportunities for Tower Bersama and Pabrik Kertas

-0.33

Correlation Coefficient

Tower Bersama  Pabrik Kertas

Very good diversification

The 3 months correlation between Tower and Pabrik is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Tower Bersama Infrastructure and Pabrik Kertas Tjiwi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pabrik Kertas Tjiwi and Tower Bersama 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 Tower Bersama Infrastructure are associated (or correlated) with Pabrik Kertas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pabrik Kertas Tjiwi has no effect on the direction of Tower Bersama i.e., Tower Bersama and Pabrik Kertas go up and down completely randomly.

Pair Corralation between Tower Bersama and Pabrik Kertas

Assuming the 90 days trading horizon Tower Bersama Infrastructure is expected to generate 0.49 times more return on investment than Pabrik Kertas. However, Tower Bersama Infrastructure is 2.04 times less risky than Pabrik Kertas. It trades about -0.07 of its potential returns per unit of risk. Pabrik Kertas Tjiwi is currently generating about -0.12 per unit of risk. If you would invest  210,000  in Tower Bersama Infrastructure on December 30, 2024 and sell it today you would lose (11,000) from holding Tower Bersama Infrastructure or give up 5.24% of portfolio value over 90 days.

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

Tower Bersama Infrastructure  vs.  Pabrik Kertas Tjiwi

Tower Bersama Infras

Risk-Adjusted Performance

Very Weak

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

Pabrik Kertas Tjiwi

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pabrik Kertas Tjiwi has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Tower Bersama and Pabrik Kertas

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

The idea behind Tower Bersama Infrastructure and Pabrik Kertas Tjiwi 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.