Correlation Between Langgeng Makmur and Sekar Laut

Can any of the company-specific risk be diversified away by investing in both Langgeng Makmur and Sekar Laut 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 Langgeng Makmur and Sekar Laut into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Langgeng Makmur Industri and Sekar Laut Tbk, you can compare the effects of market volatilities on Langgeng Makmur and Sekar Laut 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 Langgeng Makmur with a short position of Sekar Laut. Check out your portfolio center. Please also check ongoing floating volatility patterns of Langgeng Makmur and Sekar Laut.

Diversification Opportunities for Langgeng Makmur and Sekar Laut

0.2

Correlation Coefficient

Langgeng Makmur  Sekar Laut

Modest diversification

The 3 months correlation between Langgeng and Sekar is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Langgeng Makmur Industri and Sekar Laut Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sekar Laut Tbk and Langgeng Makmur 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 Langgeng Makmur Industri are associated (or correlated) with Sekar Laut. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sekar Laut Tbk has no effect on the direction of Langgeng Makmur i.e., Langgeng Makmur and Sekar Laut go up and down completely randomly.

Pair Corralation between Langgeng Makmur and Sekar Laut

Assuming the 90 days trading horizon Langgeng Makmur Industri is expected to under-perform the Sekar Laut. In addition to that, Langgeng Makmur is 1.12 times more volatile than Sekar Laut Tbk. It trades about -0.03 of its total potential returns per unit of risk. Sekar Laut Tbk is currently generating about 0.01 per unit of volatility. If you would invest  18,600  in Sekar Laut Tbk on November 30, 2024 and sell it today you would lose (600.00) from holding Sekar Laut Tbk or give up 3.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Langgeng Makmur Industri  vs.  Sekar Laut Tbk

Langgeng Makmur Industri

Risk-Adjusted Performance

Very Weak

Over the last 90 days Langgeng Makmur Industri has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Sekar Laut Tbk

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sekar Laut Tbk are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Sekar Laut 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 Langgeng Makmur and Sekar Laut

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

The idea behind Langgeng Makmur Industri and Sekar Laut Tbk 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.