Correlation Between Wilmar Cahaya and Polychem Indonesia
Can any of the company-specific risk be diversified away by investing in both Wilmar Cahaya and Polychem Indonesia 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 Wilmar Cahaya and Polychem Indonesia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wilmar Cahaya Indonesia and Polychem Indonesia Tbk, you can compare the effects of market volatilities on Wilmar Cahaya and Polychem Indonesia 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 Wilmar Cahaya with a short position of Polychem Indonesia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wilmar Cahaya and Polychem Indonesia.
Diversification Opportunities for Wilmar Cahaya and Polychem Indonesia
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Wilmar and Polychem is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Wilmar Cahaya Indonesia and Polychem Indonesia Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polychem Indonesia Tbk and Wilmar Cahaya 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 Wilmar Cahaya Indonesia are associated (or correlated) with Polychem Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polychem Indonesia Tbk has no effect on the direction of Wilmar Cahaya i.e., Wilmar Cahaya and Polychem Indonesia go up and down completely randomly.
Pair Corralation between Wilmar Cahaya and Polychem Indonesia
Assuming the 90 days trading horizon Wilmar Cahaya Indonesia is expected to under-perform the Polychem Indonesia. But the stock apears to be less risky and, when comparing its historical volatility, Wilmar Cahaya Indonesia is 1.38 times less risky than Polychem Indonesia. The stock trades about -0.22 of its potential returns per unit of risk. The Polychem Indonesia Tbk is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest 12,700 in Polychem Indonesia Tbk on September 1, 2024 and sell it today you would lose (700.00) from holding Polychem Indonesia Tbk or give up 5.51% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Wilmar Cahaya Indonesia vs. Polychem Indonesia Tbk
Performance |
| Timeline |
| Wilmar Cahaya Indonesia |
| Polychem Indonesia Tbk |
Wilmar Cahaya and Polychem Indonesia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wilmar Cahaya and Polychem Indonesia
The main advantage of trading using opposite Wilmar Cahaya and Polychem Indonesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wilmar Cahaya position performs unexpectedly, Polychem Indonesia 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 Polychem Indonesia will offset losses from the drop in Polychem Indonesia's long position.| Wilmar Cahaya vs. Delta Djakarta Tbk | Wilmar Cahaya vs. Akasha Wira International | Wilmar Cahaya vs. Darya Varia Laboratoria Tbk | Wilmar Cahaya vs. Budi Starch Sweetener |
| Polychem Indonesia vs. Perusahaan Gas Negara | Polychem Indonesia vs. Telkom Indonesia Tbk | Polychem Indonesia vs. Mitra Pinasthika Mustika | Polychem Indonesia vs. Jakarta Int Hotels |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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