Correlation Between Unilever Indonesia and Habco Trans

Can any of the company-specific risk be diversified away by investing in both Unilever Indonesia and Habco Trans 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 Unilever Indonesia and Habco Trans into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Unilever Indonesia Tbk and Habco Trans Maritima, you can compare the effects of market volatilities on Unilever Indonesia and Habco Trans 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 Unilever Indonesia with a short position of Habco Trans. Check out your portfolio center. Please also check ongoing floating volatility patterns of Unilever Indonesia and Habco Trans.

Diversification Opportunities for Unilever Indonesia and Habco Trans

-0.15

Correlation Coefficient

Unilever Indonesia  Habco Trans

Good diversification

The 3 months correlation between Unilever and Habco is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Unilever Indonesia Tbk and Habco Trans Maritima in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Habco Trans Maritima and Unilever Indonesia 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 Unilever Indonesia Tbk are associated (or correlated) with Habco Trans. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Habco Trans Maritima has no effect on the direction of Unilever Indonesia i.e., Unilever Indonesia and Habco Trans go up and down completely randomly.

Pair Corralation between Unilever Indonesia and Habco Trans

Assuming the 90 days trading horizon Unilever Indonesia is expected to generate 6.83 times less return on investment than Habco Trans. But when comparing it to its historical volatility, Unilever Indonesia Tbk is 1.36 times less risky than Habco Trans. It trades about 0.02 of its potential returns per unit of risk. Habco Trans Maritima is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  26,200  in Habco Trans Maritima on October 20, 2024 and sell it today you would earn a total of  1,000.00  from holding Habco Trans Maritima or generate 3.82% return on investment over 90 days.

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

Unilever Indonesia Tbk  vs.  Habco Trans Maritima

Unilever Indonesia Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Unilever Indonesia Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Habco Trans Maritima

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Unilever Indonesia and Habco Trans

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

The idea behind Unilever Indonesia Tbk and Habco Trans Maritima 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.