Correlation Between Energi Mega and PT Sarana

Can any of the company-specific risk be diversified away by investing in both Energi Mega and PT Sarana 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 PT Sarana 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 PT Sarana Menara, you can compare the effects of market volatilities on Energi Mega and PT Sarana 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 PT Sarana. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energi Mega and PT Sarana.

Diversification Opportunities for Energi Mega and PT Sarana

-0.54

Correlation Coefficient

Energi Mega  PT Sarana

Excellent diversification

The 3 months correlation between Energi and TOWR is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Energi Mega Persada and PT Sarana Menara in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Sarana Menara 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 PT Sarana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Sarana Menara has no effect on the direction of Energi Mega i.e., Energi Mega and PT Sarana go up and down completely randomly.

Pair Corralation between Energi Mega and PT Sarana

Assuming the 90 days trading horizon Energi Mega Persada is expected to under-perform the PT Sarana. In addition to that, Energi Mega is 2.23 times more volatile than PT Sarana Menara. It trades about -0.08 of its total potential returns per unit of risk. PT Sarana Menara is currently generating about -0.17 per unit of volatility. If you would invest  75,000  in PT Sarana Menara on September 12, 2024 and sell it today you would lose (4,000) from holding PT Sarana Menara or give up 5.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Energi Mega Persada  vs.  PT Sarana Menara

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.

PT Sarana Menara

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Sarana Menara has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Energi Mega and PT Sarana

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

The idea behind Energi Mega Persada and PT Sarana Menara 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.