Correlation Between Sentra Food and Bima Sakti

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

Diversification Opportunities for Sentra Food and Bima Sakti

-0.76

Correlation Coefficient

Sentra Food  Bima Sakti

Pay attention - limited upside

The 3 months correlation between Sentra and Bima is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Sentra Food Indonesia and Bima Sakti Pertiwi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bima Sakti Pertiwi 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 Bima Sakti. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bima Sakti Pertiwi has no effect on the direction of Sentra Food i.e., Sentra Food and Bima Sakti go up and down completely randomly.

Pair Corralation between Sentra Food and Bima Sakti

Assuming the 90 days trading horizon Sentra Food Indonesia is expected to under-perform the Bima Sakti. But the stock apears to be less risky and, when comparing its historical volatility, Sentra Food Indonesia is 2.04 times less risky than Bima Sakti. The stock trades about -0.04 of its potential returns per unit of risk. The Bima Sakti Pertiwi is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  5,100  in Bima Sakti Pertiwi on December 30, 2024 and sell it today you would earn a total of  1,800  from holding Bima Sakti Pertiwi or generate 35.29% return on investment over 90 days.

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

Sentra Food Indonesia  vs.  Bima Sakti Pertiwi

Sentra Food Indonesia

Risk-Adjusted Performance

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.

Bima Sakti Pertiwi

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bima Sakti Pertiwi are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Bima Sakti disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sentra Food and Bima Sakti

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

The idea behind Sentra Food Indonesia and Bima Sakti Pertiwi 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.