Correlation Between Sumber Alfaria and Sariguna Primatirta

Can any of the company-specific risk be diversified away by investing in both Sumber Alfaria and Sariguna Primatirta 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 Sumber Alfaria and Sariguna Primatirta into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sumber Alfaria Trijaya and Sariguna Primatirta PT, you can compare the effects of market volatilities on Sumber Alfaria and Sariguna Primatirta 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 Sumber Alfaria with a short position of Sariguna Primatirta. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumber Alfaria and Sariguna Primatirta.

Diversification Opportunities for Sumber Alfaria and Sariguna Primatirta

0.67

Correlation Coefficient

Sumber Alfaria  Sariguna Primatirta

Poor diversification

The 3 months correlation between Sumber and Sariguna is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Sumber Alfaria Trijaya and Sariguna Primatirta PT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sariguna Primatirta and Sumber Alfaria 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 Sumber Alfaria Trijaya are associated (or correlated) with Sariguna Primatirta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sariguna Primatirta has no effect on the direction of Sumber Alfaria i.e., Sumber Alfaria and Sariguna Primatirta go up and down completely randomly.

Pair Corralation between Sumber Alfaria and Sariguna Primatirta

Assuming the 90 days trading horizon Sumber Alfaria Trijaya is expected to under-perform the Sariguna Primatirta. In addition to that, Sumber Alfaria is 1.73 times more volatile than Sariguna Primatirta PT. It trades about -0.32 of its total potential returns per unit of risk. Sariguna Primatirta PT is currently generating about -0.28 per unit of volatility. If you would invest  129,000  in Sariguna Primatirta PT on September 1, 2024 and sell it today you would lose (10,000) from holding Sariguna Primatirta PT or give up 7.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Sumber Alfaria Trijaya  vs.  Sariguna Primatirta PT

Sumber Alfaria Trijaya

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sariguna Primatirta

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sariguna Primatirta PT are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Sariguna Primatirta 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 Sumber Alfaria and Sariguna Primatirta

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

The idea behind Sumber Alfaria Trijaya and Sariguna Primatirta PT 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.