Correlation Between Langgeng Makmur and Alkindo Naratama
Can any of the company-specific risk be diversified away by investing in both Langgeng Makmur and Alkindo Naratama 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 Langgeng Makmur and Alkindo Naratama into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Langgeng Makmur Industri and Alkindo Naratama Tbk, you can compare the effects of market volatilities on Langgeng Makmur and Alkindo Naratama 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 Langgeng Makmur with a short position of Alkindo Naratama. Check out your portfolio center. Please also check ongoing floating volatility patterns of Langgeng Makmur and Alkindo Naratama.
Diversification Opportunities for Langgeng Makmur and Alkindo Naratama
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Langgeng and Alkindo is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Langgeng Makmur Industri and Alkindo Naratama Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alkindo Naratama Tbk and Langgeng Makmur 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 Langgeng Makmur Industri are associated (or correlated) with Alkindo Naratama. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alkindo Naratama Tbk has no effect on the direction of Langgeng Makmur i.e., Langgeng Makmur and Alkindo Naratama go up and down completely randomly.
Pair Corralation between Langgeng Makmur and Alkindo Naratama
Assuming the 90 days trading horizon Langgeng Makmur is expected to generate 11.77 times less return on investment than Alkindo Naratama. But when comparing it to its historical volatility, Langgeng Makmur Industri is 9.07 times less risky than Alkindo Naratama. It trades about 0.03 of its potential returns per unit of risk. Alkindo Naratama Tbk is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 40,257 in Alkindo Naratama Tbk on August 25, 2024 and sell it today you would earn a total of 15,743 from holding Alkindo Naratama Tbk or generate 39.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.79% |
| Values | Daily Returns |
Langgeng Makmur Industri vs. Alkindo Naratama Tbk
Performance |
| Timeline |
| Langgeng Makmur Industri |
| Alkindo Naratama Tbk |
Langgeng Makmur and Alkindo Naratama Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Langgeng Makmur and Alkindo Naratama
The main advantage of trading using opposite Langgeng Makmur and Alkindo Naratama positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Langgeng Makmur position performs unexpectedly, Alkindo Naratama 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 Alkindo Naratama will offset losses from the drop in Alkindo Naratama's long position.| Langgeng Makmur vs. Kedaung Indah Can | Langgeng Makmur vs. Kedawung Setia Industrial | Langgeng Makmur vs. Mustika Ratu Tbk | Langgeng Makmur vs. Pyridam Farma Tbk |
| Alkindo Naratama vs. Argha Karya Prima | Alkindo Naratama vs. Gunawan Dianjaya Steel | Alkindo Naratama vs. Arwana Citramulia Tbk | Alkindo Naratama vs. Alakasa Industrindo 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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