Correlation Between Royalindo Investa and Ateliers Mecaniques

Can any of the company-specific risk be diversified away by investing in both Royalindo Investa and Ateliers Mecaniques 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 Royalindo Investa and Ateliers Mecaniques into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Royalindo Investa Wijaya and Ateliers Mecaniques DIndonesie, you can compare the effects of market volatilities on Royalindo Investa and Ateliers Mecaniques 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 Royalindo Investa with a short position of Ateliers Mecaniques. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royalindo Investa and Ateliers Mecaniques.

Diversification Opportunities for Royalindo Investa and Ateliers Mecaniques

-0.31

Correlation Coefficient

Royalindo Investa  Ateliers Mecaniques

Very good diversification

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

Pair Corralation between Royalindo Investa and Ateliers Mecaniques

Assuming the 90 days trading horizon Royalindo Investa Wijaya is expected to under-perform the Ateliers Mecaniques. But the stock apears to be less risky and, when comparing its historical volatility, Royalindo Investa Wijaya is 1.87 times less risky than Ateliers Mecaniques. The stock trades about -0.14 of its potential returns per unit of risk. The Ateliers Mecaniques DIndonesie is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  15,000  in Ateliers Mecaniques DIndonesie on February 5, 2024 and sell it today you would lose (100.00) from holding Ateliers Mecaniques DIndonesie or give up 0.67% of portfolio value over 90 days.

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

Royalindo Investa Wijaya  vs.  Ateliers Mecaniques DIndonesie

Royalindo Investa Wijaya

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Royalindo Investa Wijaya are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Royalindo Investa is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Ateliers Mecaniques

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ateliers Mecaniques DIndonesie are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Ateliers Mecaniques 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 Royalindo Investa and Ateliers Mecaniques

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

The idea behind Royalindo Investa Wijaya and Ateliers Mecaniques DIndonesie 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.