Correlation Between Bakrie Brothers and Langgeng Makmur
Can any of the company-specific risk be diversified away by investing in both Bakrie Brothers and Langgeng Makmur 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 Bakrie Brothers and Langgeng Makmur into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bakrie Brothers Tbk and Langgeng Makmur Industri, you can compare the effects of market volatilities on Bakrie Brothers and Langgeng Makmur 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 Bakrie Brothers with a short position of Langgeng Makmur. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bakrie Brothers and Langgeng Makmur.
Diversification Opportunities for Bakrie Brothers and Langgeng Makmur
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Bakrie and Langgeng is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Bakrie Brothers Tbk and Langgeng Makmur Industri in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Langgeng Makmur Industri and Bakrie Brothers 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 Bakrie Brothers Tbk are associated (or correlated) with Langgeng Makmur. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Langgeng Makmur Industri has no effect on the direction of Bakrie Brothers i.e., Bakrie Brothers and Langgeng Makmur go up and down completely randomly.
Pair Corralation between Bakrie Brothers and Langgeng Makmur
Assuming the 90 days trading horizon Bakrie Brothers is expected to generate 2.54 times less return on investment than Langgeng Makmur. But when comparing it to its historical volatility, Bakrie Brothers Tbk is 1.39 times less risky than Langgeng Makmur. It trades about 0.05 of its potential returns per unit of risk. Langgeng Makmur Industri is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 9,500 in Langgeng Makmur Industri on August 30, 2024 and sell it today you would earn a total of 5,900 from holding Langgeng Makmur Industri or generate 62.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bakrie Brothers Tbk vs. Langgeng Makmur Industri
Performance |
| Timeline |
| Bakrie Brothers Tbk |
| Langgeng Makmur Industri |
Bakrie Brothers and Langgeng Makmur Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bakrie Brothers and Langgeng Makmur
The main advantage of trading using opposite Bakrie Brothers and Langgeng Makmur positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bakrie Brothers position performs unexpectedly, Langgeng Makmur 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 Langgeng Makmur will offset losses from the drop in Langgeng Makmur's long position.| Bakrie Brothers vs. Bakrieland Development Tbk | Bakrie Brothers vs. Bakrie Sumatera Plantations | Bakrie Brothers vs. Energi Mega Persada | Bakrie Brothers vs. Darma Henwa Tbk |
| Langgeng Makmur vs. Kedaung Indah Can | Langgeng Makmur vs. Kedawung Setia Industrial | Langgeng Makmur vs. Mustika Ratu Tbk | Langgeng Makmur vs. Pyridam Farma Tbk |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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