Correlation Between Provident Agro and Pelita Samudera

Can any of the company-specific risk be diversified away by investing in both Provident Agro and Pelita Samudera 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 Provident Agro and Pelita Samudera into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Provident Agro Tbk and Pelita Samudera Shipping, you can compare the effects of market volatilities on Provident Agro and Pelita Samudera 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 Provident Agro with a short position of Pelita Samudera. Check out your portfolio center. Please also check ongoing floating volatility patterns of Provident Agro and Pelita Samudera.

Diversification Opportunities for Provident Agro and Pelita Samudera

0.53

Correlation Coefficient

Provident Agro  Pelita Samudera

Very weak diversification

The 3 months correlation between Provident and Pelita is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Provident Agro Tbk and Pelita Samudera Shipping in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pelita Samudera Shipping and Provident Agro 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 Provident Agro Tbk are associated (or correlated) with Pelita Samudera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pelita Samudera Shipping has no effect on the direction of Provident Agro i.e., Provident Agro and Pelita Samudera go up and down completely randomly.

Pair Corralation between Provident Agro and Pelita Samudera

Assuming the 90 days trading horizon Provident Agro Tbk is expected to generate 2.28 times more return on investment than Pelita Samudera. However, Provident Agro is 2.28 times more volatile than Pelita Samudera Shipping. It trades about 0.02 of its potential returns per unit of risk. Pelita Samudera Shipping is currently generating about -0.06 per unit of risk. If you would invest  42,000  in Provident Agro Tbk on December 23, 2024 and sell it today you would earn a total of  200.00  from holding Provident Agro Tbk or generate 0.48% return on investment over 90 days.

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

Provident Agro Tbk  vs.  Pelita Samudera Shipping

Provident Agro Tbk

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Provident Agro Tbk are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Provident Agro is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pelita Samudera Shipping

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pelita Samudera Shipping has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Pelita Samudera 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 Provident Agro and Pelita Samudera

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

The idea behind Provident Agro Tbk and Pelita Samudera Shipping 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.