Correlation Between IDX 30 and PT Sreeya

Can any of the company-specific risk be diversified away by investing in both IDX 30 and PT Sreeya 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 IDX 30 and PT Sreeya into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between IDX 30 Jakarta and PT Sreeya Sewu, you can compare the effects of market volatilities on IDX 30 and PT Sreeya 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 IDX 30 with a short position of PT Sreeya. Check out your portfolio center. Please also check ongoing floating volatility patterns of IDX 30 and PT Sreeya.

Diversification Opportunities for IDX 30 and PT Sreeya

0.38

Correlation Coefficient

IDX 30  PT Sreeya

Weak diversification

The 3 months correlation between IDX and SIPD is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding IDX 30 Jakarta and PT Sreeya Sewu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Sreeya Sewu and IDX 30 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 IDX 30 Jakarta are associated (or correlated) with PT Sreeya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Sreeya Sewu has no effect on the direction of IDX 30 i.e., IDX 30 and PT Sreeya go up and down completely randomly.

Pair Corralation between IDX 30 and PT Sreeya

Assuming the 90 days trading horizon IDX 30 Jakarta is expected to under-perform the PT Sreeya. But the index apears to be less risky and, when comparing its historical volatility, IDX 30 Jakarta is 4.7 times less risky than PT Sreeya. The index trades about -0.03 of its potential returns per unit of risk. The PT Sreeya Sewu is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  131,000  in PT Sreeya Sewu on September 4, 2024 and sell it today you would lose (44,500) from holding PT Sreeya Sewu or give up 33.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

IDX 30 Jakarta  vs.  PT Sreeya Sewu

Pair Trading with IDX 30 and PT Sreeya

The main advantage of trading using opposite IDX 30 and PT Sreeya positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IDX 30 position performs unexpectedly, PT Sreeya 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 Sreeya will offset losses from the drop in PT Sreeya's long position.

The idea behind IDX 30 Jakarta and PT Sreeya Sewu 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.