Correlation Between Alumindo Light and Indonesian Tobacco
Can any of the company-specific risk be diversified away by investing in both Alumindo Light and Indonesian Tobacco 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 Alumindo Light and Indonesian Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alumindo Light Metal and Indonesian Tobacco Tbk, you can compare the effects of market volatilities on Alumindo Light and Indonesian Tobacco 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 Alumindo Light with a short position of Indonesian Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alumindo Light and Indonesian Tobacco.
Diversification Opportunities for Alumindo Light and Indonesian Tobacco
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Alumindo and Indonesian is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Alumindo Light Metal and Indonesian Tobacco Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indonesian Tobacco Tbk and Alumindo Light 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 Alumindo Light Metal are associated (or correlated) with Indonesian Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indonesian Tobacco Tbk has no effect on the direction of Alumindo Light i.e., Alumindo Light and Indonesian Tobacco go up and down completely randomly.
Pair Corralation between Alumindo Light and Indonesian Tobacco
Assuming the 90 days trading horizon Alumindo Light Metal is expected to under-perform the Indonesian Tobacco. In addition to that, Alumindo Light is 2.73 times more volatile than Indonesian Tobacco Tbk. It trades about -0.04 of its total potential returns per unit of risk. Indonesian Tobacco Tbk is currently generating about 0.02 per unit of volatility. If you would invest 26,000 in Indonesian Tobacco Tbk on September 3, 2024 and sell it today you would earn a total of 400.00 from holding Indonesian Tobacco Tbk or generate 1.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 98.41% |
| Values | Daily Returns |
Alumindo Light Metal vs. Indonesian Tobacco Tbk
Performance |
| Timeline |
| Alumindo Light Metal |
| Indonesian Tobacco Tbk |
Alumindo Light and Indonesian Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alumindo Light and Indonesian Tobacco
The main advantage of trading using opposite Alumindo Light and Indonesian Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alumindo Light position performs unexpectedly, Indonesian Tobacco 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 Indonesian Tobacco will offset losses from the drop in Indonesian Tobacco's long position.| Alumindo Light vs. Timah Persero Tbk | Alumindo Light vs. Semen Indonesia Persero | Alumindo Light vs. Mitra Pinasthika Mustika | Alumindo Light vs. Jakarta Int Hotels |
| Indonesian Tobacco vs. J Resources Asia | Indonesian Tobacco vs. Garudafood Putra Putri | Indonesian Tobacco vs. Provident Agro Tbk | Indonesian Tobacco vs. Mitra Pinasthika Mustika |
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.
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