Correlation Between Sentra Food and PT Mandiri

Can any of the company-specific risk be diversified away by investing in both Sentra Food and PT Mandiri 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 Mandiri 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 Mandiri Herindo, you can compare the effects of market volatilities on Sentra Food and PT Mandiri 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 Mandiri. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sentra Food and PT Mandiri.

Diversification Opportunities for Sentra Food and PT Mandiri

0.38

Correlation Coefficient

Sentra Food  PT Mandiri

Weak diversification

The 3 months correlation between Sentra and MAHA is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Sentra Food Indonesia and PT Mandiri Herindo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Mandiri Herindo 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 Mandiri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Mandiri Herindo has no effect on the direction of Sentra Food i.e., Sentra Food and PT Mandiri go up and down completely randomly.

Pair Corralation between Sentra Food and PT Mandiri

Assuming the 90 days trading horizon Sentra Food Indonesia is expected to generate 0.94 times more return on investment than PT Mandiri. However, Sentra Food Indonesia is 1.07 times less risky than PT Mandiri. It trades about 0.02 of its potential returns per unit of risk. PT Mandiri Herindo is currently generating about -0.04 per unit of risk. If you would invest  11,700  in Sentra Food Indonesia on September 12, 2024 and sell it today you would earn a total of  100.00  from holding Sentra Food Indonesia or generate 0.85% return on investment 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 Mandiri Herindo

Sentra Food Indonesia

Risk-Adjusted Performance

1 of 100

Very Weak

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

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Mandiri Herindo has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, PT Mandiri 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 Sentra Food and PT Mandiri

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

The idea behind Sentra Food Indonesia and PT Mandiri Herindo 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.