Correlation Between Andalan Sakti and Era Mandiri

Can any of the company-specific risk be diversified away by investing in both Andalan Sakti and Era Mandiri 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 Andalan Sakti and Era Mandiri into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Andalan Sakti Primaindo and Era Mandiri Cemerlang, you can compare the effects of market volatilities on Andalan Sakti and Era Mandiri 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 Andalan Sakti with a short position of Era Mandiri. Check out your portfolio center. Please also check ongoing floating volatility patterns of Andalan Sakti and Era Mandiri.

Diversification Opportunities for Andalan Sakti and Era Mandiri

0.56

Correlation Coefficient

Andalan Sakti  Era Mandiri

Very weak diversification

The 3 months correlation between Andalan and Era is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Andalan Sakti Primaindo and Era Mandiri Cemerlang in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Era Mandiri Cemerlang and Andalan Sakti 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 Andalan Sakti Primaindo are associated (or correlated) with Era Mandiri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Era Mandiri Cemerlang has no effect on the direction of Andalan Sakti i.e., Andalan Sakti and Era Mandiri go up and down completely randomly.

Pair Corralation between Andalan Sakti and Era Mandiri

Assuming the 90 days trading horizon Andalan Sakti is expected to generate 4.77 times less return on investment than Era Mandiri. In addition to that, Andalan Sakti is 1.35 times more volatile than Era Mandiri Cemerlang. It trades about 0.1 of its total potential returns per unit of risk. Era Mandiri Cemerlang is currently generating about 0.63 per unit of volatility. If you would invest  2,400  in Era Mandiri Cemerlang on December 29, 2024 and sell it today you would earn a total of  17,300  from holding Era Mandiri Cemerlang or generate 720.83% return on investment over 90 days.

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

Andalan Sakti Primaindo  vs.  Era Mandiri Cemerlang

Andalan Sakti Primaindo

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Andalan Sakti Primaindo are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Andalan Sakti disclosed solid returns over the last few months and may actually be approaching a breakup point.

Era Mandiri Cemerlang

Risk-Adjusted Performance

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in Era Mandiri Cemerlang are ranked lower than 49 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Era Mandiri disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Andalan Sakti and Era Mandiri

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

The idea behind Andalan Sakti Primaindo and Era Mandiri Cemerlang 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.