Correlation Between Harum Energy and Erajaya Swasembada

Can any of the company-specific risk be diversified away by investing in both Harum Energy and Erajaya Swasembada 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 Harum Energy and Erajaya Swasembada into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Harum Energy Tbk and Erajaya Swasembada Tbk, you can compare the effects of market volatilities on Harum Energy and Erajaya Swasembada 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 Harum Energy with a short position of Erajaya Swasembada. Check out your portfolio center. Please also check ongoing floating volatility patterns of Harum Energy and Erajaya Swasembada.

Diversification Opportunities for Harum Energy and Erajaya Swasembada

0.31

Correlation Coefficient

Harum Energy  Erajaya Swasembada

Weak diversification

The 3 months correlation between Harum and Erajaya is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Harum Energy Tbk and Erajaya Swasembada Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erajaya Swasembada Tbk and Harum Energy 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 Harum Energy Tbk are associated (or correlated) with Erajaya Swasembada. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erajaya Swasembada Tbk has no effect on the direction of Harum Energy i.e., Harum Energy and Erajaya Swasembada go up and down completely randomly.

Pair Corralation between Harum Energy and Erajaya Swasembada

Assuming the 90 days trading horizon Harum Energy Tbk is expected to under-perform the Erajaya Swasembada. But the stock apears to be less risky and, when comparing its historical volatility, Harum Energy Tbk is 1.63 times less risky than Erajaya Swasembada. The stock trades about -0.25 of its potential returns per unit of risk. The Erajaya Swasembada Tbk is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  40,400  in Erajaya Swasembada Tbk on December 30, 2024 and sell it today you would earn a total of  0.00  from holding Erajaya Swasembada Tbk or generate 0.0% return on investment over 90 days.

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

Harum Energy Tbk  vs.  Erajaya Swasembada Tbk

Harum Energy Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Harum Energy Tbk 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 April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Erajaya Swasembada Tbk

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Erajaya Swasembada Tbk are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Erajaya Swasembada 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 Harum Energy and Erajaya Swasembada

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

The idea behind Harum Energy Tbk and Erajaya Swasembada Tbk 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..