Correlation Between Pelangi Indah and Barito Pacific

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Can any of the company-specific risk be diversified away by investing in both Pelangi Indah and Barito Pacific 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 Pelangi Indah and Barito Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pelangi Indah Canindo and Barito Pacific Tbk, you can compare the effects of market volatilities on Pelangi Indah and Barito Pacific 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 Pelangi Indah with a short position of Barito Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pelangi Indah and Barito Pacific.

Diversification Opportunities for Pelangi Indah and Barito Pacific

0.48
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Pelangi and Barito is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Pelangi Indah Canindo and Barito Pacific Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barito Pacific Tbk and Pelangi Indah 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 Pelangi Indah Canindo are associated (or correlated) with Barito Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barito Pacific Tbk has no effect on the direction of Pelangi Indah i.e., Pelangi Indah and Barito Pacific go up and down completely randomly.

Pair Corralation between Pelangi Indah and Barito Pacific

Assuming the 90 days trading horizon Pelangi Indah Canindo is expected to under-perform the Barito Pacific. But the stock apears to be less risky and, when comparing its historical volatility, Pelangi Indah Canindo is 1.28 times less risky than Barito Pacific. The stock trades about -0.08 of its potential returns per unit of risk. The Barito Pacific Tbk is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  83,325  in Barito Pacific Tbk on December 29, 2023 and sell it today you would earn a total of  11,675  from holding Barito Pacific Tbk or generate 14.01% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy99.28%
ValuesDaily Returns

Pelangi Indah Canindo  vs.  Barito Pacific Tbk

 Performance 
       Timeline  
Pelangi Indah Canindo 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Pelangi Indah Canindo has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.
Barito Pacific Tbk 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Barito Pacific Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pelangi Indah and Barito Pacific Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Pelangi Indah and Barito Pacific

The main advantage of trading using opposite Pelangi Indah and Barito Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pelangi Indah position performs unexpectedly, Barito Pacific 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 Barito Pacific will offset losses from the drop in Barito Pacific's long position.
The idea behind Pelangi Indah Canindo and Barito Pacific Tbk 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.
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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