Correlation Between Ace Hardware and PT Verona

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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 Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Ace Hardware Indonesia  vs.  PT Verona Indah

 Performance 
       Timeline  
Ace Hardware Indonesia 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Ace Hardware Indonesia are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Ace Hardware may actually be approaching a critical reversion point that can send shares even higher in December 2024.
PT Verona Indah 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days PT Verona Indah 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 December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

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.
The idea behind Ace Hardware Indonesia and PT Verona Indah 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.

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