Correlation Between Tempo Inti and Wahana Pronatural

Can any of the company-specific risk be diversified away by investing in both Tempo Inti and Wahana Pronatural 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 Tempo Inti and Wahana Pronatural into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tempo Inti Media and Wahana Pronatural, you can compare the effects of market volatilities on Tempo Inti and Wahana Pronatural 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 Tempo Inti with a short position of Wahana Pronatural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tempo Inti and Wahana Pronatural.

Diversification Opportunities for Tempo Inti and Wahana Pronatural

-0.18

Correlation Coefficient

Tempo Inti  Wahana Pronatural

Good diversification

The 3 months correlation between Tempo and Wahana is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Tempo Inti Media and Wahana Pronatural in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wahana Pronatural and Tempo Inti 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 Tempo Inti Media are associated (or correlated) with Wahana Pronatural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wahana Pronatural has no effect on the direction of Tempo Inti i.e., Tempo Inti and Wahana Pronatural go up and down completely randomly.

Pair Corralation between Tempo Inti and Wahana Pronatural

Assuming the 90 days trading horizon Tempo Inti is expected to generate 1.97 times less return on investment than Wahana Pronatural. But when comparing it to its historical volatility, Tempo Inti Media is 1.08 times less risky than Wahana Pronatural. It trades about 0.06 of its potential returns per unit of risk. Wahana Pronatural is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  9,300  in Wahana Pronatural on December 1, 2024 and sell it today you would earn a total of  3,600  from holding Wahana Pronatural or generate 38.71% return on investment over 90 days.

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

Tempo Inti Media  vs.  Wahana Pronatural

Tempo Inti Media

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tempo Inti Media are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Tempo Inti disclosed solid returns over the last few months and may actually be approaching a breakup point.

Wahana Pronatural

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wahana Pronatural are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Wahana Pronatural disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tempo Inti and Wahana Pronatural

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

The idea behind Tempo Inti Media and Wahana Pronatural 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.