Correlation Between Gihon Telekomunikasi and Sumber Energi

Can any of the company-specific risk be diversified away by investing in both Gihon Telekomunikasi and Sumber Energi 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 Gihon Telekomunikasi and Sumber Energi into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gihon Telekomunikasi Indonesia and Sumber Energi Andalan, you can compare the effects of market volatilities on Gihon Telekomunikasi and Sumber Energi 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 Gihon Telekomunikasi with a short position of Sumber Energi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gihon Telekomunikasi and Sumber Energi.

Diversification Opportunities for Gihon Telekomunikasi and Sumber Energi

0.64

Correlation Coefficient

Gihon Telekomunikasi  Sumber Energi

Poor diversification

The 3 months correlation between Gihon and Sumber is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Gihon Telekomunikasi Indonesia and Sumber Energi Andalan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumber Energi Andalan and Gihon Telekomunikasi 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 Gihon Telekomunikasi Indonesia are associated (or correlated) with Sumber Energi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumber Energi Andalan has no effect on the direction of Gihon Telekomunikasi i.e., Gihon Telekomunikasi and Sumber Energi go up and down completely randomly.

Pair Corralation between Gihon Telekomunikasi and Sumber Energi

Assuming the 90 days trading horizon Gihon Telekomunikasi Indonesia is expected to generate 0.36 times more return on investment than Sumber Energi. However, Gihon Telekomunikasi Indonesia is 2.79 times less risky than Sumber Energi. It trades about -0.08 of its potential returns per unit of risk. Sumber Energi Andalan is currently generating about -0.05 per unit of risk. If you would invest  170,500  in Gihon Telekomunikasi Indonesia on September 13, 2024 and sell it today you would lose (6,500) from holding Gihon Telekomunikasi Indonesia or give up 3.81% of portfolio value over 90 days.

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

Gihon Telekomunikasi Indonesia  vs.  Sumber Energi Andalan

Gihon Telekomunikasi

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sumber Energi Andalan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sumber Energi Andalan has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Sumber Energi 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 Gihon Telekomunikasi and Sumber Energi

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

The idea behind Gihon Telekomunikasi Indonesia and Sumber Energi Andalan 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.