Correlation Between Lion Metal and Indal Aluminium
Can any of the company-specific risk be diversified away by investing in both Lion Metal and Indal Aluminium 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 Lion Metal and Indal Aluminium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lion Metal Works and Indal Aluminium Industry, you can compare the effects of market volatilities on Lion Metal and Indal Aluminium 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 Lion Metal with a short position of Indal Aluminium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lion Metal and Indal Aluminium.
Diversification Opportunities for Lion Metal and Indal Aluminium
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Lion and Indal is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Lion Metal Works and Indal Aluminium Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indal Aluminium Industry and Lion Metal 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 Lion Metal Works are associated (or correlated) with Indal Aluminium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indal Aluminium Industry has no effect on the direction of Lion Metal i.e., Lion Metal and Indal Aluminium go up and down completely randomly.
Pair Corralation between Lion Metal and Indal Aluminium
Assuming the 90 days trading horizon Lion Metal Works is expected to generate 1.66 times more return on investment than Indal Aluminium. However, Lion Metal is 1.66 times more volatile than Indal Aluminium Industry. It trades about 0.0 of its potential returns per unit of risk. Indal Aluminium Industry is currently generating about -0.04 per unit of risk. If you would invest 48,756 in Lion Metal Works on August 30, 2024 and sell it today you would lose (18,756) from holding Lion Metal Works or give up 38.47% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lion Metal Works vs. Indal Aluminium Industry
Performance |
| Timeline |
| Lion Metal Works |
| Indal Aluminium Industry |
Lion Metal and Indal Aluminium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lion Metal and Indal Aluminium
The main advantage of trading using opposite Lion Metal and Indal Aluminium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lion Metal position performs unexpectedly, Indal Aluminium 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 Indal Aluminium will offset losses from the drop in Indal Aluminium's long position.The idea behind Lion Metal Works and Indal Aluminium Industry 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.| Indal Aluminium vs. Intanwijaya Internasional Tbk | Indal Aluminium vs. Alumindo Light Metal | Indal Aluminium vs. Champion Pacific Indonesia | Indal Aluminium vs. Betonjaya Manunggal 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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