Correlation Between Itama Ranoraya and Sarana Meditama

Can any of the company-specific risk be diversified away by investing in both Itama Ranoraya and Sarana Meditama 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 Itama Ranoraya and Sarana Meditama into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Itama Ranoraya and Sarana Meditama Metropolitan, you can compare the effects of market volatilities on Itama Ranoraya and Sarana Meditama 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 Itama Ranoraya with a short position of Sarana Meditama. Check out your portfolio center. Please also check ongoing floating volatility patterns of Itama Ranoraya and Sarana Meditama.

Diversification Opportunities for Itama Ranoraya and Sarana Meditama

0.64

Correlation Coefficient

Itama Ranoraya  Sarana Meditama

Poor diversification

The 3 months correlation between Itama and Sarana is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Itama Ranoraya and Sarana Meditama Metropolitan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sarana Meditama Metr and Itama Ranoraya 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 Itama Ranoraya are associated (or correlated) with Sarana Meditama. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sarana Meditama Metr has no effect on the direction of Itama Ranoraya i.e., Itama Ranoraya and Sarana Meditama go up and down completely randomly.

Pair Corralation between Itama Ranoraya and Sarana Meditama

Assuming the 90 days trading horizon Itama Ranoraya is expected to under-perform the Sarana Meditama. But the stock apears to be less risky and, when comparing its historical volatility, Itama Ranoraya is 1.88 times less risky than Sarana Meditama. The stock trades about -0.06 of its potential returns per unit of risk. The Sarana Meditama Metropolitan is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  27,000  in Sarana Meditama Metropolitan on September 1, 2024 and sell it today you would lose (2,000) from holding Sarana Meditama Metropolitan or give up 7.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.21%
Values	Daily Returns

Itama Ranoraya  vs.  Sarana Meditama Metropolitan

Itama Ranoraya

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Itama Ranoraya 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 December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Sarana Meditama Metr

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sarana Meditama Metropolitan 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 December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Itama Ranoraya and Sarana Meditama

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

The idea behind Itama Ranoraya and Sarana Meditama Metropolitan 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..