Correlation Between Ace Hardware and PT Verona
Can any of the company-specific risk be diversified away by investing in both Ace Hardware and PT Verona 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 Ace Hardware and PT Verona into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ace Hardware Indonesia and PT Verona Indah, you can compare the effects of market volatilities on Ace Hardware and PT Verona 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 Ace Hardware with a short position of PT Verona. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ace Hardware and PT Verona.
Diversification Opportunities for Ace Hardware and PT Verona
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ace and VERN is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Ace Hardware Indonesia and PT Verona Indah in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Verona Indah and Ace Hardware 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 Ace Hardware Indonesia are associated (or correlated) with PT Verona. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Verona Indah has no effect on the direction of Ace Hardware i.e., Ace Hardware and PT Verona go up and down completely randomly.
Pair Corralation between Ace Hardware and PT Verona
Assuming the 90 days trading horizon Ace Hardware Indonesia is expected to generate 0.86 times more return on investment than PT Verona. However, Ace Hardware Indonesia is 1.16 times less risky than PT Verona. It trades about -0.29 of its potential returns per unit of risk. PT Verona Indah is currently generating about -0.26 per unit of risk. If you would invest 92,500 in Ace Hardware Indonesia on August 24, 2024 and sell it today you would lose (12,500) from holding Ace Hardware Indonesia or give up 13.51% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Ace Hardware Indonesia vs. PT Verona Indah
Performance |
Timeline |
Ace Hardware Indonesia |
PT Verona Indah |
Ace Hardware and PT Verona Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Ace Hardware and PT Verona
The main advantage of trading using opposite Ace Hardware and PT Verona positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ace Hardware position performs unexpectedly, PT Verona 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 PT Verona will offset losses from the drop in PT Verona's long position.Ace Hardware vs. Ricky Putra Globalindo | Ace Hardware vs. Asia Pacific Investama | Ace Hardware vs. Prima Alloy Steel |
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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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