Correlation Between Erajaya Swasembada and Enseval Putra

Can any of the company-specific risk be diversified away by investing in both Erajaya Swasembada and Enseval Putra 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 Erajaya Swasembada and Enseval Putra into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Erajaya Swasembada Tbk and Enseval Putra Megatrading, you can compare the effects of market volatilities on Erajaya Swasembada and Enseval Putra 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 Erajaya Swasembada with a short position of Enseval Putra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Erajaya Swasembada and Enseval Putra.

Diversification Opportunities for Erajaya Swasembada and Enseval Putra

0.77

Correlation Coefficient

Erajaya Swasembada  Enseval Putra

Poor diversification

The 3 months correlation between Erajaya and Enseval is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Erajaya Swasembada Tbk and Enseval Putra Megatrading in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enseval Putra Megatrading and Erajaya Swasembada 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 Erajaya Swasembada Tbk are associated (or correlated) with Enseval Putra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enseval Putra Megatrading has no effect on the direction of Erajaya Swasembada i.e., Erajaya Swasembada and Enseval Putra go up and down completely randomly.

Pair Corralation between Erajaya Swasembada and Enseval Putra

Assuming the 90 days trading horizon Erajaya Swasembada Tbk is expected to under-perform the Enseval Putra. In addition to that, Erajaya Swasembada is 2.95 times more volatile than Enseval Putra Megatrading. It trades about -0.06 of its total potential returns per unit of risk. Enseval Putra Megatrading is currently generating about -0.12 per unit of volatility. If you would invest  248,000  in Enseval Putra Megatrading on September 29, 2024 and sell it today you would lose (15,000) from holding Enseval Putra Megatrading or give up 6.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Erajaya Swasembada Tbk  vs.  Enseval Putra Megatrading

Erajaya Swasembada Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Erajaya Swasembada Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Enseval Putra Megatrading

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enseval Putra Megatrading has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Enseval Putra 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 Erajaya Swasembada and Enseval Putra

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

The idea behind Erajaya Swasembada Tbk and Enseval Putra Megatrading 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.