Correlation Between Elang Mahkota and Sarana Meditama

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

By analyzing existing cross correlation between Elang Mahkota Teknologi and Sarana Meditama Metropolitan, you can compare the effects of market volatilities on Elang Mahkota and Sarana Meditama 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 Elang Mahkota with a short position of Sarana Meditama. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elang Mahkota and Sarana Meditama.

Diversification Opportunities for Elang Mahkota and Sarana Meditama

0.67

Correlation Coefficient

Elang Mahkota  Sarana Meditama

Poor diversification

The 3 months correlation between Elang and Sarana is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Elang Mahkota Teknologi and Sarana Meditama Metropolitan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sarana Meditama Metr and Elang Mahkota 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 Elang Mahkota Teknologi are associated (or correlated) with Sarana Meditama. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sarana Meditama Metr has no effect on the direction of Elang Mahkota i.e., Elang Mahkota and Sarana Meditama go up and down completely randomly.

Pair Corralation between Elang Mahkota and Sarana Meditama

Assuming the 90 days trading horizon Elang Mahkota Teknologi is expected to generate 1.06 times more return on investment than Sarana Meditama. However, Elang Mahkota is 1.06 times more volatile than Sarana Meditama Metropolitan. It trades about 0.08 of its potential returns per unit of risk. Sarana Meditama Metropolitan is currently generating about 0.07 per unit of risk. If you would invest  48,600  in Elang Mahkota Teknologi on November 29, 2024 and sell it today you would earn a total of  6,900  from holding Elang Mahkota Teknologi or generate 14.2% return on investment over 90 days.

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

Elang Mahkota Teknologi  vs.  Sarana Meditama Metropolitan

Elang Mahkota Teknologi

Risk-Adjusted Performance

Modest

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

Sarana Meditama Metr

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sarana Meditama Metropolitan are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Sarana Meditama disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Elang Mahkota and Sarana Meditama

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

The idea behind Elang Mahkota Teknologi and Sarana Meditama Metropolitan 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 Transaction History module to view history of all your transactions and understand their impact on performance.