Correlation Between Unggul Indah and Hartadinata Abadi

Can any of the company-specific risk be diversified away by investing in both Unggul Indah and Hartadinata Abadi 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 Unggul Indah and Hartadinata Abadi into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Unggul Indah Cahaya and Hartadinata Abadi Tbk, you can compare the effects of market volatilities on Unggul Indah and Hartadinata Abadi 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 Unggul Indah with a short position of Hartadinata Abadi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Unggul Indah and Hartadinata Abadi.

Diversification Opportunities for Unggul Indah and Hartadinata Abadi

-0.68

Correlation Coefficient

Unggul Indah  Hartadinata Abadi

Excellent diversification

The 3 months correlation between Unggul and Hartadinata is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Unggul Indah Cahaya and Hartadinata Abadi Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartadinata Abadi Tbk and Unggul Indah 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 Unggul Indah Cahaya are associated (or correlated) with Hartadinata Abadi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hartadinata Abadi Tbk has no effect on the direction of Unggul Indah i.e., Unggul Indah and Hartadinata Abadi go up and down completely randomly.

Pair Corralation between Unggul Indah and Hartadinata Abadi

Assuming the 90 days trading horizon Unggul Indah Cahaya is expected to under-perform the Hartadinata Abadi. But the stock apears to be less risky and, when comparing its historical volatility, Unggul Indah Cahaya is 3.43 times less risky than Hartadinata Abadi. The stock trades about -0.07 of its potential returns per unit of risk. The Hartadinata Abadi Tbk is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  35,400  in Hartadinata Abadi Tbk on December 2, 2024 and sell it today you would earn a total of  11,800  from holding Hartadinata Abadi Tbk or generate 33.33% return on investment over 90 days.

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

Unggul Indah Cahaya  vs.  Hartadinata Abadi Tbk

Unggul Indah Cahaya

Risk-Adjusted Performance

Very Weak

Over the last 90 days Unggul Indah Cahaya has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Unggul Indah is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Hartadinata Abadi Tbk

Risk-Adjusted Performance

OK

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

Pair Trading with Unggul Indah and Hartadinata Abadi

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

The idea behind Unggul Indah Cahaya and Hartadinata Abadi Tbk 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.