Correlation Between Hoffmen Cleanindo and Lion Metal
Can any of the company-specific risk be diversified away by investing in both Hoffmen Cleanindo 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 Hoffmen Cleanindo and Lion Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hoffmen Cleanindo and Lion Metal Works, you can compare the effects of market volatilities on Hoffmen Cleanindo 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 Hoffmen Cleanindo with a short position of Lion Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hoffmen Cleanindo and Lion Metal.
Diversification Opportunities for Hoffmen Cleanindo and Lion Metal
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Hoffmen and Lion is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Hoffmen Cleanindo 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 Hoffmen Cleanindo 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 Hoffmen Cleanindo 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 Hoffmen Cleanindo i.e., Hoffmen Cleanindo and Lion Metal go up and down completely randomly.
Pair Corralation between Hoffmen Cleanindo and Lion Metal
Assuming the 90 days trading horizon Hoffmen Cleanindo is expected to generate 0.7 times more return on investment than Lion Metal. However, Hoffmen Cleanindo is 1.42 times less risky than Lion Metal. It trades about 0.03 of its potential returns per unit of risk. Lion Metal Works is currently generating about -0.1 per unit of risk. If you would invest 14,800 in Hoffmen Cleanindo on September 3, 2024 and sell it today you would earn a total of 700.00 from holding Hoffmen Cleanindo or generate 4.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hoffmen Cleanindo vs. Lion Metal Works
Performance |
| Timeline |
| Hoffmen Cleanindo |
| Lion Metal Works |
Hoffmen Cleanindo and Lion Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hoffmen Cleanindo and Lion Metal
The main advantage of trading using opposite Hoffmen Cleanindo and Lion Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hoffmen Cleanindo 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.| Hoffmen Cleanindo vs. Chandra Asri Petrochemical | Hoffmen Cleanindo vs. Bank Negara Indonesia | Hoffmen Cleanindo vs. Sumber Alfaria Trijaya | Hoffmen Cleanindo vs. Mitra Pinasthika Mustika |
| Lion Metal vs. Intanwijaya Internasional Tbk | Lion Metal vs. Champion Pacific Indonesia | Lion Metal vs. Mitra Pinasthika Mustika | Lion Metal 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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