Correlation Between Pabrik Kertas and PT Utama

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

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

Diversification Opportunities for Pabrik Kertas and PT Utama

-0.4

Correlation Coefficient

Pabrik Kertas  PT Utama

Very good diversification

The 3 months correlation between Pabrik and RCCC is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Pabrik Kertas Tjiwi and PT Utama Radar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Utama Radar and Pabrik Kertas 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 Pabrik Kertas Tjiwi are associated (or correlated) with PT Utama. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Utama Radar has no effect on the direction of Pabrik Kertas i.e., Pabrik Kertas and PT Utama go up and down completely randomly.

Pair Corralation between Pabrik Kertas and PT Utama

Assuming the 90 days trading horizon Pabrik Kertas Tjiwi is expected to under-perform the PT Utama. But the stock apears to be less risky and, when comparing its historical volatility, Pabrik Kertas Tjiwi is 2.17 times less risky than PT Utama. The stock trades about -0.09 of its potential returns per unit of risk. The PT Utama Radar is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  25,200  in PT Utama Radar on September 14, 2024 and sell it today you would earn a total of  8,800  from holding PT Utama Radar or generate 34.92% return on investment over 90 days.

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

Pabrik Kertas Tjiwi  vs.  PT Utama Radar

Pabrik Kertas Tjiwi

Risk-Adjusted Performance

0 of 100

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 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.

PT Utama Radar

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PT Utama Radar are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, PT Utama disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pabrik Kertas and PT Utama

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

The idea behind Pabrik Kertas Tjiwi and PT Utama Radar 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.