Correlation Between Unilever Indonesia and Bisi International

Can any of the company-specific risk be diversified away by investing in both Unilever Indonesia and Bisi International 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 Unilever Indonesia and Bisi International into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Unilever Indonesia and Bisi International

-0.79

Correlation Coefficient

Unilever Indonesia  Bisi International

Pay attention - limited upside

The 3 months correlation between Unilever and Bisi is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Unilever Indonesia Tbk and Bisi International Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bisi International Tbk and Unilever Indonesia 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 Unilever Indonesia Tbk are associated (or correlated) with Bisi International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bisi International Tbk has no effect on the direction of Unilever Indonesia i.e., Unilever Indonesia and Bisi International go up and down completely randomly.

Pair Corralation between Unilever Indonesia and Bisi International

Assuming the 90 days trading horizon Unilever Indonesia Tbk is expected to generate 1.3 times more return on investment than Bisi International. However, Unilever Indonesia is 1.3 times more volatile than Bisi International Tbk. It trades about 0.05 of its potential returns per unit of risk. Bisi International Tbk is currently generating about -0.26 per unit of risk. If you would invest  254,000  in Unilever Indonesia Tbk on February 7, 2024 and sell it today you would earn a total of  5,000  from holding Unilever Indonesia Tbk or generate 1.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	93.33%
Values	Daily Returns

Unilever Indonesia Tbk  vs.  Bisi International Tbk

Unilever Indonesia Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Unilever Indonesia 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.

Bisi International Tbk

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bisi International Tbk are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Bisi International disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Unilever Indonesia and Bisi International

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

The idea behind Unilever Indonesia Tbk and Bisi International 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.