Correlation Between HEXINDO ADIPERKASA and SIMCERE PHARMAC

Can any of the company-specific risk be diversified away by investing in both HEXINDO ADIPERKASA and SIMCERE PHARMAC 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 HEXINDO ADIPERKASA and SIMCERE PHARMAC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HEXINDO ADIPERKASA and SIMCERE PHARMAC GRP, you can compare the effects of market volatilities on HEXINDO ADIPERKASA and SIMCERE PHARMAC 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 HEXINDO ADIPERKASA with a short position of SIMCERE PHARMAC. Check out your portfolio center. Please also check ongoing floating volatility patterns of HEXINDO ADIPERKASA and SIMCERE PHARMAC.

Diversification Opportunities for HEXINDO ADIPERKASA and SIMCERE PHARMAC

-0.4

Correlation Coefficient

HEXINDO ADIPERKASA  SIMCERE PHARMAC

Very good diversification

The 3 months correlation between HEXINDO and SIMCERE is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding HEXINDO ADIPERKASA and SIMCERE PHARMAC GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIMCERE PHARMAC GRP and HEXINDO ADIPERKASA 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 HEXINDO ADIPERKASA are associated (or correlated) with SIMCERE PHARMAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIMCERE PHARMAC GRP has no effect on the direction of HEXINDO ADIPERKASA i.e., HEXINDO ADIPERKASA and SIMCERE PHARMAC go up and down completely randomly.

Pair Corralation between HEXINDO ADIPERKASA and SIMCERE PHARMAC

Assuming the 90 days trading horizon HEXINDO ADIPERKASA is expected to under-perform the SIMCERE PHARMAC. But the stock apears to be less risky and, when comparing its historical volatility, HEXINDO ADIPERKASA is 2.68 times less risky than SIMCERE PHARMAC. The stock trades about -0.4 of its potential returns per unit of risk. The SIMCERE PHARMAC GRP is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  86.00  in SIMCERE PHARMAC GRP on September 26, 2024 and sell it today you would lose (5.00) from holding SIMCERE PHARMAC GRP or give up 5.81% of portfolio value over 90 days.

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

HEXINDO ADIPERKASA  vs.  SIMCERE PHARMAC GRP

HEXINDO ADIPERKASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HEXINDO ADIPERKASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

SIMCERE PHARMAC GRP

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SIMCERE PHARMAC GRP are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, SIMCERE PHARMAC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HEXINDO ADIPERKASA and SIMCERE PHARMAC

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

The idea behind HEXINDO ADIPERKASA and SIMCERE PHARMAC GRP 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.