Correlation Between Centratama Telekomunikasi and Fast Food
Can any of the company-specific risk be diversified away by investing in both Centratama Telekomunikasi and Fast Food 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 Centratama Telekomunikasi and Fast Food into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Centratama Telekomunikasi Ind and Fast Food Indonesia, you can compare the effects of market volatilities on Centratama Telekomunikasi and Fast Food 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 Centratama Telekomunikasi with a short position of Fast Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Centratama Telekomunikasi and Fast Food.
Diversification Opportunities for Centratama Telekomunikasi and Fast Food
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Centratama and Fast is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Centratama Telekomunikasi Ind and Fast Food Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Food Indonesia and Centratama Telekomunikasi 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 Centratama Telekomunikasi Ind are associated (or correlated) with Fast Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fast Food Indonesia has no effect on the direction of Centratama Telekomunikasi i.e., Centratama Telekomunikasi and Fast Food go up and down completely randomly.
Pair Corralation between Centratama Telekomunikasi and Fast Food
Assuming the 90 days trading horizon Centratama Telekomunikasi Ind is expected to generate 0.91 times more return on investment than Fast Food. However, Centratama Telekomunikasi Ind is 1.1 times less risky than Fast Food. It trades about -0.1 of its potential returns per unit of risk. Fast Food Indonesia is currently generating about -0.19 per unit of risk. If you would invest 5,600 in Centratama Telekomunikasi Ind on October 26, 2024 and sell it today you would lose (1,100) from holding Centratama Telekomunikasi Ind or give up 19.64% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Centratama Telekomunikasi Ind vs. Fast Food Indonesia
Performance |
| Timeline |
| Centratama Telekomunikasi |
| Fast Food Indonesia |
Centratama Telekomunikasi and Fast Food Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Centratama Telekomunikasi and Fast Food
The main advantage of trading using opposite Centratama Telekomunikasi and Fast Food positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Centratama Telekomunikasi position performs unexpectedly, Fast Food 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 Fast Food will offset losses from the drop in Fast Food's long position.The idea behind Centratama Telekomunikasi Ind and Fast Food Indonesia 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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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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