Correlation Between Sentul City and Polychem Indonesia

Can any of the company-specific risk be diversified away by investing in both Sentul City and Polychem Indonesia 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 Sentul City and Polychem Indonesia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sentul City Tbk and Polychem Indonesia Tbk, you can compare the effects of market volatilities on Sentul City and Polychem Indonesia 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 Sentul City with a short position of Polychem Indonesia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sentul City and Polychem Indonesia.

Diversification Opportunities for Sentul City and Polychem Indonesia

-0.31

Correlation Coefficient

Sentul City  Polychem Indonesia

Very good diversification

The 3 months correlation between Sentul and Polychem is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Sentul City Tbk and Polychem Indonesia Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polychem Indonesia Tbk and Sentul City 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 Sentul City Tbk are associated (or correlated) with Polychem Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polychem Indonesia Tbk has no effect on the direction of Sentul City i.e., Sentul City and Polychem Indonesia go up and down completely randomly.

Pair Corralation between Sentul City and Polychem Indonesia

Assuming the 90 days trading horizon Sentul City Tbk is expected to generate 3.86 times more return on investment than Polychem Indonesia. However, Sentul City is 3.86 times more volatile than Polychem Indonesia Tbk. It trades about 0.05 of its potential returns per unit of risk. Polychem Indonesia Tbk is currently generating about -0.09 per unit of risk. If you would invest  6,600  in Sentul City Tbk on December 31, 2024 and sell it today you would earn a total of  600.00  from holding Sentul City Tbk or generate 9.09% return on investment over 90 days.

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

Sentul City Tbk  vs.  Polychem Indonesia Tbk

Sentul City Tbk

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sentul City Tbk are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Sentul City disclosed solid returns over the last few months and may actually be approaching a breakup point.

Polychem Indonesia Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Polychem Indonesia Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Sentul City and Polychem Indonesia

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

The idea behind Sentul City Tbk and Polychem Indonesia 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.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.