Correlation Between Tifa Finance and Batavia Prosperindo

Can any of the company-specific risk be diversified away by investing in both Tifa Finance and Batavia Prosperindo 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 Tifa Finance and Batavia Prosperindo into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Tifa Finance and Batavia Prosperindo

0.69

Correlation Coefficient

Tifa Finance  Batavia Prosperindo

Poor diversification

The 3 months correlation between Tifa and Batavia is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Tifa Finance Tbk and Batavia Prosperindo Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Batavia Prosperindo and Tifa Finance 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 Tifa Finance Tbk are associated (or correlated) with Batavia Prosperindo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Batavia Prosperindo has no effect on the direction of Tifa Finance i.e., Tifa Finance and Batavia Prosperindo go up and down completely randomly.

Pair Corralation between Tifa Finance and Batavia Prosperindo

Assuming the 90 days trading horizon Tifa Finance Tbk is expected to generate 0.21 times more return on investment than Batavia Prosperindo. However, Tifa Finance Tbk is 4.7 times less risky than Batavia Prosperindo. It trades about -0.29 of its potential returns per unit of risk. Batavia Prosperindo Finance is currently generating about -0.07 per unit of risk. If you would invest  58,000  in Tifa Finance Tbk on September 2, 2024 and sell it today you would lose (2,500) from holding Tifa Finance Tbk or give up 4.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Tifa Finance Tbk  vs.  Batavia Prosperindo Finance

Tifa Finance Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tifa Finance Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Tifa Finance is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Batavia Prosperindo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Batavia Prosperindo Finance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Batavia Prosperindo 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 Tifa Finance and Batavia Prosperindo

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

The idea behind Tifa Finance Tbk and Batavia Prosperindo Finance 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.