Correlation Between PT Hatten and Lion Metal

Can any of the company-specific risk be diversified away by investing in both PT Hatten and Lion Metal 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 PT Hatten and Lion Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PT Hatten Bali and Lion Metal Works, you can compare the effects of market volatilities on PT Hatten and Lion Metal 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 PT Hatten with a short position of Lion Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Hatten and Lion Metal.

Diversification Opportunities for PT Hatten and Lion Metal

-0.47

Correlation Coefficient

PT Hatten  Lion Metal

Very good diversification

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

Pair Corralation between PT Hatten and Lion Metal

Assuming the 90 days trading horizon PT Hatten Bali is expected to generate 1.18 times more return on investment than Lion Metal. However, PT Hatten is 1.18 times more volatile than Lion Metal Works. It trades about 0.15 of its potential returns per unit of risk. Lion Metal Works is currently generating about -0.14 per unit of risk. If you would invest  25,600  in PT Hatten Bali on September 3, 2024 and sell it today you would earn a total of  9,400  from holding PT Hatten Bali or generate 36.72% return on investment over 90 days.

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

PT Hatten Bali  vs.  Lion Metal Works

PT Hatten Bali

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PT Hatten Bali are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, PT Hatten disclosed solid returns over the last few months and may actually be approaching a breakup point.

Lion Metal Works

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lion Metal Works 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 January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with PT Hatten and Lion Metal

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

The idea behind PT Hatten Bali and Lion Metal Works 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.