Correlation Between Sentra Food and PT Wahana

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

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

Diversification Opportunities for Sentra Food and PT Wahana

0.32

Correlation Coefficient

Sentra Food  PT Wahana

Weak diversification

The 3 months correlation between Sentra and COCO is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Sentra Food Indonesia and PT Wahana Interfood in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Wahana Interfood and Sentra Food 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 Sentra Food Indonesia are associated (or correlated) with PT Wahana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Wahana Interfood has no effect on the direction of Sentra Food i.e., Sentra Food and PT Wahana go up and down completely randomly.

Pair Corralation between Sentra Food and PT Wahana

Assuming the 90 days trading horizon Sentra Food Indonesia is expected to generate 0.52 times more return on investment than PT Wahana. However, Sentra Food Indonesia is 1.91 times less risky than PT Wahana. It trades about -0.15 of its potential returns per unit of risk. PT Wahana Interfood is currently generating about -0.15 per unit of risk. If you would invest  11,900  in Sentra Food Indonesia on September 1, 2024 and sell it today you would lose (400.00) from holding Sentra Food Indonesia or give up 3.36% of portfolio value over 90 days.

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

Sentra Food Indonesia  vs.  PT Wahana Interfood

Sentra Food Indonesia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sentra Food Indonesia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Sentra Food is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

PT Wahana Interfood

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Wahana Interfood 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 December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Sentra Food and PT Wahana

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

The idea behind Sentra Food Indonesia and PT Wahana Interfood 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.