Correlation Between Erajaya Swasembada and Jakarta Int

Can any of the company-specific risk be diversified away by investing in both Erajaya Swasembada and Jakarta Int 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 Jakarta Int 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 Jakarta Int Hotels, you can compare the effects of market volatilities on Erajaya Swasembada and Jakarta Int 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 Jakarta Int. Check out your portfolio center. Please also check ongoing floating volatility patterns of Erajaya Swasembada and Jakarta Int.

Diversification Opportunities for Erajaya Swasembada and Jakarta Int

-0.49

Correlation Coefficient

Erajaya Swasembada  Jakarta Int

Very good diversification

The 3 months correlation between Erajaya and Jakarta is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Erajaya Swasembada Tbk and Jakarta Int Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jakarta Int Hotels 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 Jakarta Int. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jakarta Int Hotels has no effect on the direction of Erajaya Swasembada i.e., Erajaya Swasembada and Jakarta Int go up and down completely randomly.

Pair Corralation between Erajaya Swasembada and Jakarta Int

Assuming the 90 days trading horizon Erajaya Swasembada is expected to generate 8.28 times less return on investment than Jakarta Int. But when comparing it to its historical volatility, Erajaya Swasembada Tbk is 1.57 times less risky than Jakarta Int. It trades about 0.02 of its potential returns per unit of risk. Jakarta Int Hotels is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  35,800  in Jakarta Int Hotels on September 3, 2024 and sell it today you would earn a total of  209,200  from holding Jakarta Int Hotels or generate 584.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Erajaya Swasembada Tbk  vs.  Jakarta Int Hotels

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 quite persistent forward-looking signals, Erajaya Swasembada is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Jakarta Int Hotels

Risk-Adjusted Performance

31 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Jakarta Int Hotels are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Jakarta Int disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Erajaya Swasembada and Jakarta Int

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

The idea behind Erajaya Swasembada Tbk and Jakarta Int Hotels 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.

Check out your portfolio center.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.