Correlation Between Langgeng Makmur and Bakrie Brothers
Can any of the company-specific risk be diversified away by investing in both Langgeng Makmur and Bakrie Brothers 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 Bakrie Brothers 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 Bakrie Brothers Tbk, you can compare the effects of market volatilities on Langgeng Makmur and Bakrie Brothers 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 Bakrie Brothers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Langgeng Makmur and Bakrie Brothers.
Diversification Opportunities for Langgeng Makmur and Bakrie Brothers
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Langgeng and Bakrie is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Langgeng Makmur Industri and Bakrie Brothers Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bakrie Brothers 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 Bakrie Brothers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bakrie Brothers Tbk has no effect on the direction of Langgeng Makmur i.e., Langgeng Makmur and Bakrie Brothers go up and down completely randomly.
Pair Corralation between Langgeng Makmur and Bakrie Brothers
Assuming the 90 days trading horizon Langgeng Makmur Industri is expected to generate 1.54 times more return on investment than Bakrie Brothers. However, Langgeng Makmur is 1.54 times more volatile than Bakrie Brothers Tbk. It trades about 0.03 of its potential returns per unit of risk. Bakrie Brothers Tbk is currently generating about -0.01 per unit of risk. If you would invest 12,700 in Langgeng Makmur Industri on August 27, 2024 and sell it today you would earn a total of 5,500 from holding Langgeng Makmur Industri or generate 43.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Langgeng Makmur Industri vs. Bakrie Brothers Tbk
Performance |
| Timeline |
| Langgeng Makmur Industri |
| Bakrie Brothers Tbk |
Langgeng Makmur and Bakrie Brothers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Langgeng Makmur and Bakrie Brothers
The main advantage of trading using opposite Langgeng Makmur and Bakrie Brothers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Langgeng Makmur position performs unexpectedly, Bakrie Brothers 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 Bakrie Brothers will offset losses from the drop in Bakrie Brothers' 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 |
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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