Correlation Between Pratama Abadi and Sekar Laut

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

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

Diversification Opportunities for Pratama Abadi and Sekar Laut

0.49

Correlation Coefficient

Pratama Abadi  Sekar Laut

Very weak diversification

The 3 months correlation between Pratama and Sekar is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Pratama Abadi Nusa 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 Pratama Abadi 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 Pratama Abadi Nusa 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 Pratama Abadi i.e., Pratama Abadi and Sekar Laut go up and down completely randomly.

Pair Corralation between Pratama Abadi and Sekar Laut

Assuming the 90 days trading horizon Pratama Abadi Nusa is expected to under-perform the Sekar Laut. In addition to that, Pratama Abadi is 1.53 times more volatile than Sekar Laut Tbk. It trades about -0.04 of its total potential returns per unit of risk. Sekar Laut Tbk is currently generating about -0.04 per unit of volatility. If you would invest  19,000  in Sekar Laut Tbk on October 12, 2024 and sell it today you would lose (500.00) from holding Sekar Laut Tbk or give up 2.63% of portfolio value over 90 days.

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

Pratama Abadi Nusa  vs.  Sekar Laut Tbk

Pratama Abadi Nusa

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pratama Abadi Nusa are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Pratama Abadi disclosed solid returns over the last few months and may actually be approaching a breakup point.

Sekar Laut Tbk

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sekar Laut Tbk are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Sekar Laut disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pratama Abadi and Sekar Laut

The main advantage of trading using opposite Pratama Abadi and Sekar Laut positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pratama Abadi 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 Pratama Abadi Nusa 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.