Correlation Between Timah Persero and Capital Financial

Can any of the company-specific risk be diversified away by investing in both Timah Persero and Capital Financial 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 Timah Persero and Capital Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Timah Persero Tbk and Capital Financial Indonesia, you can compare the effects of market volatilities on Timah Persero and Capital Financial 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 Timah Persero with a short position of Capital Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Timah Persero and Capital Financial.

Diversification Opportunities for Timah Persero and Capital Financial

-0.67

Correlation Coefficient

Timah Persero  Capital Financial

Excellent diversification

The 3 months correlation between Timah and Capital is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Timah Persero Tbk and Capital Financial Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Financial and Timah Persero 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 Timah Persero Tbk are associated (or correlated) with Capital Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Financial has no effect on the direction of Timah Persero i.e., Timah Persero and Capital Financial go up and down completely randomly.

Pair Corralation between Timah Persero and Capital Financial

Assuming the 90 days trading horizon Timah Persero Tbk is expected to under-perform the Capital Financial. In addition to that, Timah Persero is 1.42 times more volatile than Capital Financial Indonesia. It trades about -0.04 of its total potential returns per unit of risk. Capital Financial Indonesia is currently generating about 0.22 per unit of volatility. If you would invest  56,500  in Capital Financial Indonesia on December 30, 2024 and sell it today you would earn a total of  19,500  from holding Capital Financial Indonesia or generate 34.51% return on investment over 90 days.

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

Timah Persero Tbk  vs.  Capital Financial Indonesia

Timah Persero Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Timah Persero 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.

Capital Financial

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Financial Indonesia are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Capital Financial disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Timah Persero and Capital Financial

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

The idea behind Timah Persero Tbk and Capital Financial 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.