Correlation Between Indal Aluminium and Lion Metal
Can any of the company-specific risk be diversified away by investing in both Indal Aluminium and Lion Metal 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 Indal Aluminium and Lion Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Indal Aluminium Industry and Lion Metal Works, you can compare the effects of market volatilities on Indal Aluminium and Lion Metal 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 Indal Aluminium with a short position of Lion Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indal Aluminium and Lion Metal.
Diversification Opportunities for Indal Aluminium and Lion Metal
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Indal and Lion is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Indal Aluminium Industry and Lion Metal Works in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lion Metal Works and Indal Aluminium 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 Indal Aluminium Industry are associated (or correlated) with Lion Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lion Metal Works has no effect on the direction of Indal Aluminium i.e., Indal Aluminium and Lion Metal go up and down completely randomly.
Pair Corralation between Indal Aluminium and Lion Metal
Assuming the 90 days trading horizon Indal Aluminium Industry is expected to generate 1.22 times more return on investment than Lion Metal. However, Indal Aluminium is 1.22 times more volatile than Lion Metal Works. It trades about -0.05 of its potential returns per unit of risk. Lion Metal Works is currently generating about -0.12 per unit of risk. If you would invest 20,000 in Indal Aluminium Industry on August 27, 2024 and sell it today you would lose (7,000) from holding Indal Aluminium Industry or give up 35.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Indal Aluminium Industry vs. Lion Metal Works
Performance |
| Timeline |
| Indal Aluminium Industry |
| Lion Metal Works |
Indal Aluminium and Lion Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Indal Aluminium and Lion Metal
The main advantage of trading using opposite Indal Aluminium and Lion Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indal Aluminium position performs unexpectedly, Lion Metal 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 Lion Metal will offset losses from the drop in Lion Metal's long position.| Indal Aluminium vs. Kedaung Indah Can | Indal Aluminium vs. Langgeng Makmur Industri | Indal Aluminium vs. Kabelindo Murni Tbk | Indal Aluminium vs. Mustika Ratu Tbk |
| Lion Metal vs. Lionmesh Prima Tbk | Lion Metal vs. Pelangi Indah Canindo | Lion Metal vs. Indal Aluminium Industry | Lion Metal vs. Intanwijaya Internasional 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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