Correlation Between PT Chemstar and PT Saraswanti

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

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

Diversification Opportunities for PT Chemstar and PT Saraswanti

0.69

Correlation Coefficient

PT Chemstar  PT Saraswanti

Poor diversification

The 3 months correlation between CHEM and SWID is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding PT Chemstar Indonesia and PT Saraswanti Indoland in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Saraswanti Indoland and PT Chemstar 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 PT Chemstar Indonesia are associated (or correlated) with PT Saraswanti. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Saraswanti Indoland has no effect on the direction of PT Chemstar i.e., PT Chemstar and PT Saraswanti go up and down completely randomly.

Pair Corralation between PT Chemstar and PT Saraswanti

Assuming the 90 days trading horizon PT Chemstar Indonesia is expected to under-perform the PT Saraswanti. In addition to that, PT Chemstar is 2.74 times more volatile than PT Saraswanti Indoland. It trades about -0.05 of its total potential returns per unit of risk. PT Saraswanti Indoland is currently generating about -0.12 per unit of volatility. If you would invest  7,700  in PT Saraswanti Indoland on October 26, 2024 and sell it today you would lose (1,100) from holding PT Saraswanti Indoland or give up 14.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

PT Chemstar Indonesia  vs.  PT Saraswanti Indoland

PT Chemstar Indonesia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Chemstar Indonesia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

PT Saraswanti Indoland

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Saraswanti Indoland has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with PT Chemstar and PT Saraswanti

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

The idea behind PT Chemstar Indonesia and PT Saraswanti Indoland 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.