Correlation Between Era Mandiri and Andalan Sakti

Can any of the company-specific risk be diversified away by investing in both Era Mandiri and Andalan Sakti 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 Era Mandiri and Andalan Sakti into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Era Mandiri Cemerlang and Andalan Sakti Primaindo, you can compare the effects of market volatilities on Era Mandiri and Andalan Sakti 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 Era Mandiri with a short position of Andalan Sakti. Check out your portfolio center. Please also check ongoing floating volatility patterns of Era Mandiri and Andalan Sakti.

Diversification Opportunities for Era Mandiri and Andalan Sakti

0.87

Correlation Coefficient

Era Mandiri  Andalan Sakti

Very poor diversification

The 3 months correlation between Era and Andalan is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Era Mandiri Cemerlang and Andalan Sakti Primaindo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Andalan Sakti Primaindo and Era Mandiri 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 Era Mandiri Cemerlang are associated (or correlated) with Andalan Sakti. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Andalan Sakti Primaindo has no effect on the direction of Era Mandiri i.e., Era Mandiri and Andalan Sakti go up and down completely randomly.

Pair Corralation between Era Mandiri and Andalan Sakti

Assuming the 90 days trading horizon Era Mandiri Cemerlang is expected to generate 0.84 times more return on investment than Andalan Sakti. However, Era Mandiri Cemerlang is 1.19 times less risky than Andalan Sakti. It trades about -0.26 of its potential returns per unit of risk. Andalan Sakti Primaindo is currently generating about -0.31 per unit of risk. If you would invest  5,000  in Era Mandiri Cemerlang on September 4, 2024 and sell it today you would lose (2,400) from holding Era Mandiri Cemerlang or give up 48.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

Era Mandiri Cemerlang  vs.  Andalan Sakti Primaindo

Era Mandiri Cemerlang

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Era Mandiri Cemerlang 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 January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Andalan Sakti Primaindo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Andalan Sakti Primaindo 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 January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Era Mandiri and Andalan Sakti

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

The idea behind Era Mandiri Cemerlang and Andalan Sakti Primaindo 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.