Correlation Between Sumber Alfaria and Perdana Bangun

Can any of the company-specific risk be diversified away by investing in both Sumber Alfaria and Perdana Bangun 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 Perdana Bangun 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 Perdana Bangun Pusaka, you can compare the effects of market volatilities on Sumber Alfaria and Perdana Bangun 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 Perdana Bangun. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumber Alfaria and Perdana Bangun.

Diversification Opportunities for Sumber Alfaria and Perdana Bangun

-0.62

Correlation Coefficient

Sumber Alfaria  Perdana Bangun

Excellent diversification

The 3 months correlation between Sumber and Perdana is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Sumber Alfaria Trijaya and Perdana Bangun Pusaka in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perdana Bangun Pusaka 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 Perdana Bangun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perdana Bangun Pusaka has no effect on the direction of Sumber Alfaria i.e., Sumber Alfaria and Perdana Bangun go up and down completely randomly.

Pair Corralation between Sumber Alfaria and Perdana Bangun

Assuming the 90 days trading horizon Sumber Alfaria Trijaya is expected to under-perform the Perdana Bangun. But the stock apears to be less risky and, when comparing its historical volatility, Sumber Alfaria Trijaya is 4.32 times less risky than Perdana Bangun. The stock trades about -0.04 of its potential returns per unit of risk. The Perdana Bangun Pusaka is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  94,000  in Perdana Bangun Pusaka on September 16, 2024 and sell it today you would earn a total of  58,000  from holding Perdana Bangun Pusaka or generate 61.7% return on investment over 90 days.

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

Sumber Alfaria Trijaya  vs.  Perdana Bangun Pusaka

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.

Perdana Bangun Pusaka

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Perdana Bangun Pusaka are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Perdana Bangun disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sumber Alfaria and Perdana Bangun

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

The idea behind Sumber Alfaria Trijaya and Perdana Bangun Pusaka 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.