Correlation Between Unggul Indah and Intanwijaya Internasional

Can any of the company-specific risk be diversified away by investing in both Unggul Indah and Intanwijaya Internasional 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 Intanwijaya Internasional 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 Intanwijaya Internasional Tbk, you can compare the effects of market volatilities on Unggul Indah and Intanwijaya Internasional 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 Intanwijaya Internasional. Check out your portfolio center. Please also check ongoing floating volatility patterns of Unggul Indah and Intanwijaya Internasional.

Diversification Opportunities for Unggul Indah and Intanwijaya Internasional

0.71

Correlation Coefficient

Unggul Indah  Intanwijaya Internasional

Poor diversification

The 3 months correlation between Unggul and Intanwijaya is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Unggul Indah Cahaya and Intanwijaya Internasional Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intanwijaya Internasional 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 Intanwijaya Internasional. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intanwijaya Internasional has no effect on the direction of Unggul Indah i.e., Unggul Indah and Intanwijaya Internasional go up and down completely randomly.

Pair Corralation between Unggul Indah and Intanwijaya Internasional

Assuming the 90 days trading horizon Unggul Indah Cahaya is expected to generate 0.93 times more return on investment than Intanwijaya Internasional. However, Unggul Indah Cahaya is 1.08 times less risky than Intanwijaya Internasional. It trades about -0.07 of its potential returns per unit of risk. Intanwijaya Internasional Tbk is currently generating about -0.08 per unit of risk. If you would invest  795,000  in Unggul Indah Cahaya on December 2, 2024 and sell it today you would lose (45,000) from holding Unggul Indah Cahaya or give up 5.66% of portfolio value over 90 days.

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

Unggul Indah Cahaya  vs.  Intanwijaya Internasional 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 current stock price mess, may contribute to short-term losses for the institutional investors.

Intanwijaya Internasional

Risk-Adjusted Performance

Very Weak

Over the last 90 days Intanwijaya Internasional Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak 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.

Pair Trading with Unggul Indah and Intanwijaya Internasional

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

The idea behind Unggul Indah Cahaya and Intanwijaya Internasional 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.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.