Correlation Between Trust Finance and Jakarta Int

Can any of the company-specific risk be diversified away by investing in both Trust Finance and Jakarta Int 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 Trust Finance and Jakarta Int into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Trust Finance Indonesia and Jakarta Int Hotels, you can compare the effects of market volatilities on Trust Finance and Jakarta Int 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 Trust Finance with a short position of Jakarta Int. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trust Finance and Jakarta Int.

Diversification Opportunities for Trust Finance and Jakarta Int

0.47

Correlation Coefficient

Trust Finance  Jakarta Int

Very weak diversification

The 3 months correlation between Trust and Jakarta is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Trust Finance Indonesia and Jakarta Int Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jakarta Int Hotels and Trust Finance 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 Trust Finance Indonesia are associated (or correlated) with Jakarta Int. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jakarta Int Hotels has no effect on the direction of Trust Finance i.e., Trust Finance and Jakarta Int go up and down completely randomly.

Pair Corralation between Trust Finance and Jakarta Int

Assuming the 90 days trading horizon Trust Finance is expected to generate 4.88 times less return on investment than Jakarta Int. But when comparing it to its historical volatility, Trust Finance Indonesia is 2.6 times less risky than Jakarta Int. It trades about 0.17 of its potential returns per unit of risk. Jakarta Int Hotels is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  35,000  in Jakarta Int Hotels on September 13, 2024 and sell it today you would earn a total of  160,500  from holding Jakarta Int Hotels or generate 458.57% return on investment over 90 days.

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

Trust Finance Indonesia  vs.  Jakarta Int Hotels

Trust Finance Indonesia

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Trust Finance Indonesia are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Trust Finance disclosed solid returns over the last few months and may actually be approaching a breakup point.

Jakarta Int Hotels

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Jakarta Int Hotels are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Jakarta Int disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Trust Finance and Jakarta Int

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

The idea behind Trust Finance Indonesia and Jakarta Int Hotels 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.