Correlation Between Elang Mahkota and Triputra Agro

Can any of the company-specific risk be diversified away by investing in both Elang Mahkota and Triputra Agro 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 Triputra Agro 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 Triputra Agro Persada, you can compare the effects of market volatilities on Elang Mahkota and Triputra Agro 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 Triputra Agro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elang Mahkota and Triputra Agro.

Diversification Opportunities for Elang Mahkota and Triputra Agro

-0.27

Correlation Coefficient

Elang Mahkota  Triputra Agro

Very good diversification

The 3 months correlation between Elang and Triputra is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Elang Mahkota Teknologi and Triputra Agro Persada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Triputra Agro Persada 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 Triputra Agro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Triputra Agro Persada has no effect on the direction of Elang Mahkota i.e., Elang Mahkota and Triputra Agro go up and down completely randomly.

Pair Corralation between Elang Mahkota and Triputra Agro

Assuming the 90 days trading horizon Elang Mahkota is expected to generate 1.05 times less return on investment than Triputra Agro. In addition to that, Elang Mahkota is 1.9 times more volatile than Triputra Agro Persada. It trades about 0.06 of its total potential returns per unit of risk. Triputra Agro Persada is currently generating about 0.13 per unit of volatility. If you would invest  76,500  in Triputra Agro Persada on December 30, 2024 and sell it today you would earn a total of  11,500  from holding Triputra Agro Persada or generate 15.03% return on investment over 90 days.

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

Elang Mahkota Teknologi  vs.  Triputra Agro Persada

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 5 (%) 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.

Triputra Agro Persada

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Triputra Agro Persada are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Triputra Agro disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Elang Mahkota and Triputra Agro

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

The idea behind Elang Mahkota Teknologi and Triputra Agro Persada 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.