Correlation Between Sentra Food and Putra Mandiri

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

Diversification Opportunities for Sentra Food and Putra Mandiri

0.73

Correlation Coefficient

Sentra Food  Putra Mandiri

Poor diversification

The 3 months correlation between Sentra and Putra is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Sentra Food Indonesia and Putra Mandiri Jembar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putra Mandiri Jembar 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 Putra Mandiri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putra Mandiri Jembar has no effect on the direction of Sentra Food i.e., Sentra Food and Putra Mandiri go up and down completely randomly.

Pair Corralation between Sentra Food and Putra Mandiri

Assuming the 90 days trading horizon Sentra Food Indonesia is expected to generate 1.98 times more return on investment than Putra Mandiri. However, Sentra Food is 1.98 times more volatile than Putra Mandiri Jembar. It trades about 0.02 of its potential returns per unit of risk. Putra Mandiri Jembar is currently generating about -0.01 per unit of risk. If you would invest  10,600  in Sentra Food Indonesia on October 7, 2024 and sell it today you would earn a total of  1,000.00  from holding Sentra Food Indonesia or generate 9.43% return on investment over 90 days.

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

Sentra Food Indonesia  vs.  Putra Mandiri Jembar

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.

Putra Mandiri Jembar

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Putra Mandiri Jembar 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 February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Sentra Food and Putra Mandiri

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

The idea behind Sentra Food Indonesia and Putra Mandiri Jembar 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .