Correlation Between Sumi Indo and Jembo Cable

Can any of the company-specific risk be diversified away by investing in both Sumi Indo and Jembo Cable 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 Sumi Indo and Jembo Cable into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sumi Indo Kabel and Jembo Cable, you can compare the effects of market volatilities on Sumi Indo and Jembo Cable 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 Sumi Indo with a short position of Jembo Cable. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumi Indo and Jembo Cable.

Diversification Opportunities for Sumi Indo and Jembo Cable

0.4

Correlation Coefficient

Sumi Indo  Jembo Cable

Very weak diversification

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

Pair Corralation between Sumi Indo and Jembo Cable

Assuming the 90 days trading horizon Sumi Indo Kabel is expected to under-perform the Jembo Cable. In addition to that, Sumi Indo is 1.08 times more volatile than Jembo Cable. It trades about -0.16 of its total potential returns per unit of risk. Jembo Cable is currently generating about -0.03 per unit of volatility. If you would invest  62,000  in Jembo Cable on September 4, 2024 and sell it today you would lose (2,000) from holding Jembo Cable or give up 3.23% of portfolio value over 90 days.

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

Sumi Indo Kabel  vs.  Jembo Cable

Sumi Indo Kabel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sumi Indo Kabel 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.

Jembo Cable

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jembo Cable has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Jembo Cable 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 Sumi Indo and Jembo Cable

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

The idea behind Sumi Indo Kabel and Jembo Cable 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.

Check out your portfolio center.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.