Correlation Between Amazon and Sinar Mas

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Can any of the company-specific risk be diversified away by investing in both Amazon and Sinar Mas 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 Amazon and Sinar Mas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Sinar Mas Multiartha, you can compare the effects of market volatilities on Amazon and Sinar Mas 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 Amazon with a short position of Sinar Mas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Sinar Mas.

Diversification Opportunities for Amazon and Sinar Mas

-0.23
  Correlation Coefficient

Very good diversification

The 3 months correlation between Amazon and Sinar is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Sinar Mas Multiartha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinar Mas Multiartha and Amazon 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 Amazon Inc are associated (or correlated) with Sinar Mas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinar Mas Multiartha has no effect on the direction of Amazon i.e., Amazon and Sinar Mas go up and down completely randomly.

Pair Corralation between Amazon and Sinar Mas

Given the investment horizon of 90 days Amazon Inc is expected to generate 6.69 times more return on investment than Sinar Mas. However, Amazon is 6.69 times more volatile than Sinar Mas Multiartha. It trades about 0.15 of its potential returns per unit of risk. Sinar Mas Multiartha is currently generating about 0.04 per unit of risk. If you would invest  17,625  in Amazon Inc on September 3, 2024 and sell it today you would earn a total of  3,164  from holding Amazon Inc or generate 17.95% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy96.88%
ValuesDaily Returns

Amazon Inc  vs.  Sinar Mas Multiartha

 Performance 
       Timeline  
Amazon Inc 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Amazon displayed solid returns over the last few months and may actually be approaching a breakup point.
Sinar Mas Multiartha 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Sinar Mas Multiartha are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Sinar Mas is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Amazon and Sinar Mas Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Amazon and Sinar Mas

The main advantage of trading using opposite Amazon and Sinar Mas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Sinar Mas 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 Sinar Mas will offset losses from the drop in Sinar Mas' long position.
The idea behind Amazon Inc and Sinar Mas Multiartha 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.

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