Correlation Between Arita Prima and Bintang Mitra
Can any of the company-specific risk be diversified away by investing in both Arita Prima and Bintang Mitra 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 Arita Prima and Bintang Mitra into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arita Prima Indonesia and Bintang Mitra Semestaraya, you can compare the effects of market volatilities on Arita Prima and Bintang Mitra 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 Arita Prima with a short position of Bintang Mitra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arita Prima and Bintang Mitra.
Diversification Opportunities for Arita Prima and Bintang Mitra
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Arita and Bintang is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Arita Prima Indonesia and Bintang Mitra Semestaraya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bintang Mitra Semestaraya and Arita Prima 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 Arita Prima Indonesia are associated (or correlated) with Bintang Mitra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bintang Mitra Semestaraya has no effect on the direction of Arita Prima i.e., Arita Prima and Bintang Mitra go up and down completely randomly.
Pair Corralation between Arita Prima and Bintang Mitra
Assuming the 90 days trading horizon Arita Prima Indonesia is expected to generate 0.68 times more return on investment than Bintang Mitra. However, Arita Prima Indonesia is 1.47 times less risky than Bintang Mitra. It trades about 0.14 of its potential returns per unit of risk. Bintang Mitra Semestaraya is currently generating about -0.26 per unit of risk. If you would invest 17,600 in Arita Prima Indonesia on August 28, 2024 and sell it today you would earn a total of 600.00 from holding Arita Prima Indonesia or generate 3.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arita Prima Indonesia vs. Bintang Mitra Semestaraya
Performance |
| Timeline |
| Arita Prima Indonesia |
| Bintang Mitra Semestaraya |
Arita Prima and Bintang Mitra Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arita Prima and Bintang Mitra
The main advantage of trading using opposite Arita Prima and Bintang Mitra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arita Prima position performs unexpectedly, Bintang Mitra 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 Bintang Mitra will offset losses from the drop in Bintang Mitra's long position.The idea behind Arita Prima Indonesia and Bintang Mitra Semestaraya 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.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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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