Correlation Between Sentul City and Modernland Realty

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

Diversification Opportunities for Sentul City and Modernland Realty

-0.51

Correlation Coefficient

Sentul City  Modernland Realty

Excellent diversification

The 3 months correlation between Sentul and Modernland is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Sentul City Tbk and Modernland Realty Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Modernland Realty 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 Modernland Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Modernland Realty has no effect on the direction of Sentul City i.e., Sentul City and Modernland Realty go up and down completely randomly.

Pair Corralation between Sentul City and Modernland Realty

Assuming the 90 days trading horizon Sentul City Tbk is expected to generate 3.69 times more return on investment than Modernland Realty. However, Sentul City is 3.69 times more volatile than Modernland Realty Ltd. It trades about 0.05 of its potential returns per unit of risk. Modernland Realty Ltd is currently generating about -0.02 per unit of risk. If you would invest  6,500  in Sentul City Tbk on December 24, 2024 and sell it today you would earn a total of  400.00  from holding Sentul City Tbk or generate 6.15% return on investment over 90 days.

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

Sentul City Tbk  vs.  Modernland Realty Ltd

Sentul City Tbk

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sentul City Tbk are ranked lower than 3 (%) 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.

Modernland Realty

Risk-Adjusted Performance

Very Weak

Over the last 90 days Modernland Realty Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Modernland Realty 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 Modernland Realty

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

The idea behind Sentul City Tbk and Modernland Realty Ltd 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.