Correlation Between Provident Agro and Sido Muncul

Can any of the company-specific risk be diversified away by investing in both Provident Agro and Sido Muncul 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 Sido Muncul 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 Sido Muncul PT, you can compare the effects of market volatilities on Provident Agro and Sido Muncul 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 Sido Muncul. Check out your portfolio center. Please also check ongoing floating volatility patterns of Provident Agro and Sido Muncul.

Diversification Opportunities for Provident Agro and Sido Muncul

-0.06

Correlation Coefficient

Provident Agro  Sido Muncul

Good diversification

The 3 months correlation between Provident and Sido is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Provident Agro Tbk and Sido Muncul PT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sido Muncul PT 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 Sido Muncul. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sido Muncul PT has no effect on the direction of Provident Agro i.e., Provident Agro and Sido Muncul go up and down completely randomly.

Pair Corralation between Provident Agro and Sido Muncul

Assuming the 90 days trading horizon Provident Agro Tbk is expected to under-perform the Sido Muncul. In addition to that, Provident Agro is 1.19 times more volatile than Sido Muncul PT. It trades about -0.18 of its total potential returns per unit of risk. Sido Muncul PT is currently generating about -0.02 per unit of volatility. If you would invest  58,500  in Sido Muncul PT on December 5, 2024 and sell it today you would lose (2,000) from holding Sido Muncul PT or give up 3.42% of portfolio value over 90 days.

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

Provident Agro Tbk  vs.  Sido Muncul PT

Provident Agro Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Provident Agro Tbk 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 April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Sido Muncul PT

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sido Muncul PT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Sido Muncul 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 Sido Muncul

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

The idea behind Provident Agro Tbk and Sido Muncul PT 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.