Correlation Between Sentra Food and Siloam International

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

Diversification Opportunities for Sentra Food and Siloam International

0.11

Correlation Coefficient

Sentra Food  Siloam International

Average diversification

The 3 months correlation between Sentra and Siloam is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Sentra Food Indonesia and Siloam International Hospitals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siloam International 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 Siloam International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siloam International has no effect on the direction of Sentra Food i.e., Sentra Food and Siloam International go up and down completely randomly.

Pair Corralation between Sentra Food and Siloam International

Assuming the 90 days trading horizon Sentra Food Indonesia is expected to generate 0.59 times more return on investment than Siloam International. However, Sentra Food Indonesia is 1.71 times less risky than Siloam International. It trades about -0.01 of its potential returns per unit of risk. Siloam International Hospitals is currently generating about -0.09 per unit of risk. If you would invest  11,800  in Sentra Food Indonesia on December 2, 2024 and sell it today you would lose (100.00) from holding Sentra Food Indonesia or give up 0.85% of portfolio value over 90 days.

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

Sentra Food Indonesia  vs.  Siloam International Hospitals

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.

Siloam International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Siloam International Hospitals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Sentra Food and Siloam International

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

The idea behind Sentra Food Indonesia and Siloam International Hospitals 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 Commodity Directory module to find actively traded commodities issued by global exchanges.