Correlation Between Era Media and Chandra Asri

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

By analyzing existing cross correlation between Era Media Sejahtera and Chandra Asri Petrochemical, you can compare the effects of market volatilities on Era Media and Chandra Asri 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 Era Media with a short position of Chandra Asri. Check out your portfolio center. Please also check ongoing floating volatility patterns of Era Media and Chandra Asri.

Diversification Opportunities for Era Media and Chandra Asri

0.39

Correlation Coefficient

Era Media  Chandra Asri

Weak diversification

The 3 months correlation between Era and Chandra is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Era Media Sejahtera and Chandra Asri Petrochemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chandra Asri Petroch and Era Media 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 Era Media Sejahtera are associated (or correlated) with Chandra Asri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chandra Asri Petroch has no effect on the direction of Era Media i.e., Era Media and Chandra Asri go up and down completely randomly.

Pair Corralation between Era Media and Chandra Asri

Assuming the 90 days trading horizon Era Media Sejahtera is expected to generate 1.52 times more return on investment than Chandra Asri. However, Era Media is 1.52 times more volatile than Chandra Asri Petrochemical. It trades about 0.11 of its potential returns per unit of risk. Chandra Asri Petrochemical is currently generating about 0.02 per unit of risk. If you would invest  5,800  in Era Media Sejahtera on December 30, 2024 and sell it today you would earn a total of  2,600  from holding Era Media Sejahtera or generate 44.83% return on investment over 90 days.

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

Era Media Sejahtera  vs.  Chandra Asri Petrochemical

Era Media Sejahtera

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Era Media Sejahtera are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Era Media disclosed solid returns over the last few months and may actually be approaching a breakup point.

Chandra Asri Petroch

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chandra Asri Petrochemical are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Chandra Asri may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Era Media and Chandra Asri

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

The idea behind Era Media Sejahtera and Chandra Asri Petrochemical 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.