Correlation Between Berlian Laju and Electronic City

Can any of the company-specific risk be diversified away by investing in both Berlian Laju and Electronic City 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 Berlian Laju and Electronic City into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Berlian Laju Tanker and Electronic City Indonesia, you can compare the effects of market volatilities on Berlian Laju and Electronic City 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 Berlian Laju with a short position of Electronic City. Check out your portfolio center. Please also check ongoing floating volatility patterns of Berlian Laju and Electronic City.

Diversification Opportunities for Berlian Laju and Electronic City

0.31

Correlation Coefficient

Berlian Laju  Electronic City

Weak diversification

The 3 months correlation between Berlian and Electronic is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Berlian Laju Tanker and Electronic City Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic City Indonesia and Berlian Laju 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 Berlian Laju Tanker are associated (or correlated) with Electronic City. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electronic City Indonesia has no effect on the direction of Berlian Laju i.e., Berlian Laju and Electronic City go up and down completely randomly.

Pair Corralation between Berlian Laju and Electronic City

Assuming the 90 days trading horizon Berlian Laju Tanker is expected to under-perform the Electronic City. But the stock apears to be less risky and, when comparing its historical volatility, Berlian Laju Tanker is 2.0 times less risky than Electronic City. The stock trades about -0.11 of its potential returns per unit of risk. The Electronic City Indonesia is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  68,150  in Electronic City Indonesia on February 10, 2024 and sell it today you would lose (41,150) from holding Electronic City Indonesia or give up 60.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Berlian Laju Tanker  vs.  Electronic City Indonesia

Berlian Laju Tanker

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Berlian Laju Tanker 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.

Electronic City Indonesia

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Electronic City Indonesia are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Electronic City is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Berlian Laju and Electronic City

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

The idea behind Berlian Laju Tanker and Electronic City Indonesia 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.