Correlation Between Electronic City and Catur Sentosa

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

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

Diversification Opportunities for Electronic City and Catur Sentosa

-0.23

Correlation Coefficient

Electronic City  Catur Sentosa

Very good diversification

The 3 months correlation between Electronic and Catur is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Electronic City Indonesia and Catur Sentosa Adiprana in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catur Sentosa Adiprana and Electronic 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 Electronic City Indonesia are associated (or correlated) with Catur Sentosa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catur Sentosa Adiprana has no effect on the direction of Electronic City i.e., Electronic City and Catur Sentosa go up and down completely randomly.

Pair Corralation between Electronic City and Catur Sentosa

Assuming the 90 days trading horizon Electronic City Indonesia is expected to generate 3.01 times more return on investment than Catur Sentosa. However, Electronic City is 3.01 times more volatile than Catur Sentosa Adiprana. It trades about 0.08 of its potential returns per unit of risk. Catur Sentosa Adiprana is currently generating about -0.03 per unit of risk. If you would invest  24,600  in Electronic City Indonesia on September 14, 2024 and sell it today you would earn a total of  6,200  from holding Electronic City Indonesia or generate 25.2% return on investment over 90 days.

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

Electronic City Indonesia  vs.  Catur Sentosa Adiprana

Electronic City Indonesia

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Electronic City Indonesia are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Electronic City disclosed solid returns over the last few months and may actually be approaching a breakup point.

Catur Sentosa Adiprana

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Catur Sentosa Adiprana has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Catur Sentosa 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 Electronic City and Catur Sentosa

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

The idea behind Electronic City Indonesia and Catur Sentosa Adiprana 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.