Correlation Between International Business and PT Semen

Can any of the company-specific risk be diversified away by investing in both International Business and PT Semen 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 International Business and PT Semen into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between International Business Machines and PT Semen Indonesia, you can compare the effects of market volatilities on International Business and PT Semen 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 International Business with a short position of PT Semen. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Business and PT Semen.

Diversification Opportunities for International Business and PT Semen

-0.39

Correlation Coefficient

International Business  PT Semen

Very good diversification

The 3 months correlation between International and PSGTF is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and PT Semen Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Semen Indonesia and International Business 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 International Business Machines are associated (or correlated) with PT Semen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Semen Indonesia has no effect on the direction of International Business i.e., International Business and PT Semen go up and down completely randomly.

Pair Corralation between International Business and PT Semen

Considering the 90-day investment horizon International Business Machines is expected to generate 0.56 times more return on investment than PT Semen. However, International Business Machines is 1.78 times less risky than PT Semen. It trades about 0.1 of its potential returns per unit of risk. PT Semen Indonesia is currently generating about -0.07 per unit of risk. If you would invest  13,024  in International Business Machines on September 13, 2024 and sell it today you would earn a total of  10,202  from holding International Business Machines or generate 78.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	74.55%
Values	Daily Returns

International Business Machine  vs.  PT Semen Indonesia

International Business

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental drivers, International Business may actually be approaching a critical reversion point that can send shares even higher in January 2025.

PT Semen Indonesia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Semen Indonesia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with International Business and PT Semen

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

The idea behind International Business Machines and PT Semen Indonesia 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.