Correlation Between Weha Transportasi and Ace Hardware

Can any of the company-specific risk be diversified away by investing in both Weha Transportasi and Ace Hardware 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 Weha Transportasi and Ace Hardware into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Weha Transportasi and Ace Hardware

-0.58

Correlation Coefficient

Weha Transportasi  Ace Hardware

Excellent diversification

The 3 months correlation between Weha and Ace is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Weha Transportasi Indonesia and Ace Hardware Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ace Hardware Indonesia and Weha Transportasi 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 Weha Transportasi Indonesia are associated (or correlated) with Ace Hardware. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ace Hardware Indonesia has no effect on the direction of Weha Transportasi i.e., Weha Transportasi and Ace Hardware go up and down completely randomly.

Pair Corralation between Weha Transportasi and Ace Hardware

Assuming the 90 days trading horizon Weha Transportasi Indonesia is expected to under-perform the Ace Hardware. In addition to that, Weha Transportasi is 1.3 times more volatile than Ace Hardware Indonesia. It trades about -0.24 of its total potential returns per unit of risk. Ace Hardware Indonesia is currently generating about 0.07 per unit of volatility. If you would invest  78,500  in Ace Hardware Indonesia on February 20, 2024 and sell it today you would earn a total of  7,000  from holding Ace Hardware Indonesia or generate 8.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Weha Transportasi Indonesia  vs.  Ace Hardware Indonesia

Weha Transportasi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Weha Transportasi Indonesia 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.

Ace Hardware Indonesia

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ace Hardware Indonesia are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Ace Hardware may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Weha Transportasi and Ace Hardware

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

The idea behind Weha Transportasi Indonesia and Ace Hardware 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.