Correlation Between Pembangunan Jaya and Sepatu Bata

Can any of the company-specific risk be diversified away by investing in both Pembangunan Jaya and Sepatu Bata 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 Pembangunan Jaya and Sepatu Bata into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pembangunan Jaya Ancol and Sepatu Bata Tbk, you can compare the effects of market volatilities on Pembangunan Jaya and Sepatu Bata 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 Pembangunan Jaya with a short position of Sepatu Bata. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pembangunan Jaya and Sepatu Bata.

Diversification Opportunities for Pembangunan Jaya and Sepatu Bata

-0.29

Correlation Coefficient

Pembangunan Jaya  Sepatu Bata

Very good diversification

The 3 months correlation between Pembangunan and Sepatu is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Pembangunan Jaya Ancol and Sepatu Bata Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sepatu Bata Tbk and Pembangunan Jaya 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 Pembangunan Jaya Ancol are associated (or correlated) with Sepatu Bata. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sepatu Bata Tbk has no effect on the direction of Pembangunan Jaya i.e., Pembangunan Jaya and Sepatu Bata go up and down completely randomly.

Pair Corralation between Pembangunan Jaya and Sepatu Bata

Assuming the 90 days trading horizon Pembangunan Jaya Ancol is expected to under-perform the Sepatu Bata. In addition to that, Pembangunan Jaya is 1.43 times more volatile than Sepatu Bata Tbk. It trades about -0.13 of its total potential returns per unit of risk. Sepatu Bata Tbk is currently generating about 0.04 per unit of volatility. If you would invest  5,000  in Sepatu Bata Tbk on December 4, 2024 and sell it today you would earn a total of  100.00  from holding Sepatu Bata Tbk or generate 2.0% return on investment over 90 days.

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

Pembangunan Jaya Ancol  vs.  Sepatu Bata Tbk

Pembangunan Jaya Ancol

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pembangunan Jaya Ancol 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.

Sepatu Bata Tbk

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sepatu Bata Tbk are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Sepatu Bata 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 Pembangunan Jaya and Sepatu Bata

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

The idea behind Pembangunan Jaya Ancol and Sepatu Bata 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.