Correlation Between Sentul City and Bakrieland Development

Can any of the company-specific risk be diversified away by investing in both Sentul City and Bakrieland Development 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 Bakrieland Development 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 Bakrieland Development Tbk, you can compare the effects of market volatilities on Sentul City and Bakrieland Development 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 Bakrieland Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sentul City and Bakrieland Development.

Diversification Opportunities for Sentul City and Bakrieland Development

0.41

Correlation Coefficient

Sentul City  Bakrieland Development

Very weak diversification

The 3 months correlation between Sentul and Bakrieland is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Sentul City Tbk and Bakrieland Development Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bakrieland Development 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 Bakrieland Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bakrieland Development has no effect on the direction of Sentul City i.e., Sentul City and Bakrieland Development go up and down completely randomly.

Pair Corralation between Sentul City and Bakrieland Development

Assuming the 90 days trading horizon Sentul City is expected to generate 1.57 times less return on investment than Bakrieland Development. But when comparing it to its historical volatility, Sentul City Tbk is 1.98 times less risky than Bakrieland Development. It trades about 0.1 of its potential returns per unit of risk. Bakrieland Development Tbk is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  800.00  in Bakrieland Development Tbk on September 1, 2024 and sell it today you would earn a total of  400.00  from holding Bakrieland Development Tbk or generate 50.0% return on investment over 90 days.

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

Sentul City Tbk  vs.  Bakrieland Development Tbk

Sentul City Tbk

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sentul City Tbk are ranked lower than 7 (%) 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.

Bakrieland Development

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bakrieland Development Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Bakrieland Development 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 Sentul City and Bakrieland Development

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

The idea behind Sentul City Tbk and Bakrieland Development 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.

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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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.