Correlation Between Transcoal Pacific and Bhakti Multi

Can any of the company-specific risk be diversified away by investing in both Transcoal Pacific and Bhakti Multi 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 Transcoal Pacific and Bhakti Multi into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Transcoal Pacific Tbk and Bhakti Multi Artha, you can compare the effects of market volatilities on Transcoal Pacific and Bhakti Multi 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 Transcoal Pacific with a short position of Bhakti Multi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transcoal Pacific and Bhakti Multi.

Diversification Opportunities for Transcoal Pacific and Bhakti Multi

0.41

Correlation Coefficient

Transcoal Pacific  Bhakti Multi

Very weak diversification

The 3 months correlation between Transcoal and Bhakti is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Transcoal Pacific Tbk and Bhakti Multi Artha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bhakti Multi Artha and Transcoal Pacific 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 Transcoal Pacific Tbk are associated (or correlated) with Bhakti Multi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bhakti Multi Artha has no effect on the direction of Transcoal Pacific i.e., Transcoal Pacific and Bhakti Multi go up and down completely randomly.

Pair Corralation between Transcoal Pacific and Bhakti Multi

Assuming the 90 days trading horizon Transcoal Pacific Tbk is expected to generate 1.2 times more return on investment than Bhakti Multi. However, Transcoal Pacific is 1.2 times more volatile than Bhakti Multi Artha. It trades about -0.01 of its potential returns per unit of risk. Bhakti Multi Artha is currently generating about -0.05 per unit of risk. If you would invest  795,695  in Transcoal Pacific Tbk on October 11, 2024 and sell it today you would lose (145,695) from holding Transcoal Pacific Tbk or give up 18.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.79%
Values	Daily Returns

Transcoal Pacific Tbk  vs.  Bhakti Multi Artha

Transcoal Pacific Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transcoal Pacific Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Bhakti Multi Artha

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bhakti Multi Artha has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Transcoal Pacific and Bhakti Multi

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

The idea behind Transcoal Pacific Tbk and Bhakti Multi Artha 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.