Correlation Between Alumindo Light and Suparma Tbk

Can any of the company-specific risk be diversified away by investing in both Alumindo Light and Suparma Tbk 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 Alumindo Light and Suparma Tbk into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alumindo Light Metal and Suparma Tbk, you can compare the effects of market volatilities on Alumindo Light and Suparma Tbk 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 Alumindo Light with a short position of Suparma Tbk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alumindo Light and Suparma Tbk.

Diversification Opportunities for Alumindo Light and Suparma Tbk

0.7

Correlation Coefficient

Alumindo Light  Suparma Tbk

Poor diversification

The 3 months correlation between Alumindo and Suparma is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Alumindo Light Metal and Suparma Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suparma Tbk and Alumindo Light 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 Alumindo Light Metal are associated (or correlated) with Suparma Tbk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suparma Tbk has no effect on the direction of Alumindo Light i.e., Alumindo Light and Suparma Tbk go up and down completely randomly.

Pair Corralation between Alumindo Light and Suparma Tbk

Assuming the 90 days trading horizon Alumindo Light Metal is expected to under-perform the Suparma Tbk. But the stock apears to be less risky and, when comparing its historical volatility, Alumindo Light Metal is 1.06 times less risky than Suparma Tbk. The stock trades about -0.69 of its potential returns per unit of risk. The Suparma Tbk is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  32,000  in Suparma Tbk on February 21, 2024 and sell it today you would lose (1,600) from holding Suparma Tbk or give up 5.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.74%
Values	Daily Returns

Alumindo Light Metal  vs.  Suparma Tbk

Alumindo Light Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alumindo Light Metal 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 June 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Suparma Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Suparma 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 June 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Alumindo Light and Suparma Tbk

The main advantage of trading using opposite Alumindo Light and Suparma Tbk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alumindo Light position performs unexpectedly, Suparma Tbk 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 Suparma Tbk will offset losses from the drop in Suparma Tbk's long position.

The idea behind Alumindo Light Metal and Suparma 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.

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.