Correlation Between Indocement Tunggal and Akr Corporindo

Can any of the company-specific risk be diversified away by investing in both Indocement Tunggal and Akr Corporindo 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 Indocement Tunggal and Akr Corporindo into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Indocement Tunggal Prakarsa and Akr Corporindo Tbk, you can compare the effects of market volatilities on Indocement Tunggal and Akr Corporindo 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 Indocement Tunggal with a short position of Akr Corporindo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indocement Tunggal and Akr Corporindo.

Diversification Opportunities for Indocement Tunggal and Akr Corporindo

-0.33

Correlation Coefficient

Indocement Tunggal  Akr Corporindo

Very good diversification

The 3 months correlation between Indocement and Akr is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Indocement Tunggal Prakarsa and Akr Corporindo Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Akr Corporindo Tbk and Indocement Tunggal 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 Indocement Tunggal Prakarsa are associated (or correlated) with Akr Corporindo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Akr Corporindo Tbk has no effect on the direction of Indocement Tunggal i.e., Indocement Tunggal and Akr Corporindo go up and down completely randomly.

Pair Corralation between Indocement Tunggal and Akr Corporindo

Assuming the 90 days trading horizon Indocement Tunggal Prakarsa is expected to under-perform the Akr Corporindo. But the stock apears to be less risky and, when comparing its historical volatility, Indocement Tunggal Prakarsa is 1.07 times less risky than Akr Corporindo. The stock trades about -0.44 of its potential returns per unit of risk. The Akr Corporindo Tbk is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  173,500  in Akr Corporindo Tbk on February 5, 2024 and sell it today you would lose (9,500) from holding Akr Corporindo Tbk or give up 5.48% of portfolio value over 90 days.

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

Indocement Tunggal Prakarsa  vs.  Akr Corporindo Tbk

Indocement Tunggal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indocement Tunggal Prakarsa 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.

Akr Corporindo Tbk

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Akr Corporindo Tbk are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Akr Corporindo 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 Indocement Tunggal and Akr Corporindo

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

The idea behind Indocement Tunggal Prakarsa and Akr Corporindo 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.

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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.