Correlation Between Erajaya Swasembada and Radiant Utama

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

Diversification Opportunities for Erajaya Swasembada and Radiant Utama

-0.17

Correlation Coefficient

Erajaya Swasembada  Radiant Utama

Good diversification

The 3 months correlation between Erajaya and Radiant is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Erajaya Swasembada Tbk and Radiant Utama Interinsco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Radiant Utama Interinsco 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 Radiant Utama. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Radiant Utama Interinsco has no effect on the direction of Erajaya Swasembada i.e., Erajaya Swasembada and Radiant Utama go up and down completely randomly.

Pair Corralation between Erajaya Swasembada and Radiant Utama

Assuming the 90 days trading horizon Erajaya Swasembada Tbk is expected to generate 2.96 times more return on investment than Radiant Utama. However, Erajaya Swasembada is 2.96 times more volatile than Radiant Utama Interinsco. It trades about 0.02 of its potential returns per unit of risk. Radiant Utama Interinsco is currently generating about -0.2 per unit of risk. If you would invest  40,400  in Erajaya Swasembada Tbk on December 29, 2024 and sell it today you would earn a total of  0.00  from holding Erajaya Swasembada Tbk or generate 0.0% return on investment over 90 days.

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

Erajaya Swasembada Tbk  vs.  Radiant Utama Interinsco

Erajaya Swasembada Tbk

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Erajaya Swasembada Tbk are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Radiant Utama Interinsco

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Erajaya Swasembada and Radiant Utama

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

The idea behind Erajaya Swasembada Tbk and Radiant Utama Interinsco 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.