Correlation Between Energi Mega and Sampoerna Agro

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

By analyzing existing cross correlation between Energi Mega Persada and Sampoerna Agro Tbk, you can compare the effects of market volatilities on Energi Mega and Sampoerna 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 Energi Mega with a short position of Sampoerna Agro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energi Mega and Sampoerna Agro.

Diversification Opportunities for Energi Mega and Sampoerna Agro

0.56

Correlation Coefficient

Energi Mega  Sampoerna Agro

Very weak diversification

The 3 months correlation between Energi and Sampoerna is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Energi Mega Persada and Sampoerna Agro Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sampoerna Agro Tbk and Energi Mega 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 Energi Mega Persada are associated (or correlated) with Sampoerna Agro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sampoerna Agro Tbk has no effect on the direction of Energi Mega i.e., Energi Mega and Sampoerna Agro go up and down completely randomly.

Pair Corralation between Energi Mega and Sampoerna Agro

Assuming the 90 days trading horizon Energi Mega Persada is expected to generate 4.49 times more return on investment than Sampoerna Agro. However, Energi Mega is 4.49 times more volatile than Sampoerna Agro Tbk. It trades about 0.09 of its potential returns per unit of risk. Sampoerna Agro Tbk is currently generating about 0.05 per unit of risk. If you would invest  20,000  in Energi Mega Persada on August 31, 2024 and sell it today you would earn a total of  4,200  from holding Energi Mega Persada or generate 21.0% return on investment over 90 days.

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

Energi Mega Persada  vs.  Sampoerna Agro Tbk

Energi Mega Persada

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Energi Mega Persada are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Energi Mega disclosed solid returns over the last few months and may actually be approaching a breakup point.

Sampoerna Agro Tbk

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sampoerna Agro Tbk are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Sampoerna Agro 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 Energi Mega and Sampoerna Agro

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

The idea behind Energi Mega Persada and Sampoerna Agro Tbk 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.