Correlation Between Federal National and PT Semen

Can any of the company-specific risk be diversified away by investing in both Federal National and PT Semen 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 Federal National and PT Semen into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Federal National Mortgage and PT Semen Indonesia, you can compare the effects of market volatilities on Federal National and PT Semen 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 Federal National with a short position of PT Semen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal National and PT Semen.

Diversification Opportunities for Federal National and PT Semen

-0.53

Correlation Coefficient

Federal National  PT Semen

Excellent diversification

The 3 months correlation between Federal and PSGTF is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Federal National Mortgage and PT Semen Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Semen Indonesia and Federal National 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 Federal National Mortgage are associated (or correlated) with PT Semen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Semen Indonesia has no effect on the direction of Federal National i.e., Federal National and PT Semen go up and down completely randomly.

Pair Corralation between Federal National and PT Semen

Assuming the 90 days horizon Federal National Mortgage is expected to generate 1.17 times more return on investment than PT Semen. However, Federal National is 1.17 times more volatile than PT Semen Indonesia. It trades about 0.13 of its potential returns per unit of risk. PT Semen Indonesia is currently generating about -0.13 per unit of risk. If you would invest  3,300,000  in Federal National Mortgage on December 4, 2024 and sell it today you would earn a total of  500,000  from holding Federal National Mortgage or generate 15.15% return on investment over 90 days.

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

Federal National Mortgage  vs.  PT Semen Indonesia

Federal National Mortgage

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Federal National Mortgage are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting technical and fundamental indicators, Federal National displayed solid returns over the last few months and may actually be approaching a breakup point.

PT Semen Indonesia

Risk-Adjusted Performance

Very Weak

Over the last 90 days PT Semen Indonesia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Federal National and PT Semen

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

The idea behind Federal National Mortgage and PT Semen Indonesia 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.