Correlation Between Palma Serasih and Diamond Food

Can any of the company-specific risk be diversified away by investing in both Palma Serasih and Diamond Food 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 Palma Serasih and Diamond Food into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Palma Serasih PT and Diamond Food Indonesia, you can compare the effects of market volatilities on Palma Serasih and Diamond Food 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 Palma Serasih with a short position of Diamond Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Palma Serasih and Diamond Food.

Diversification Opportunities for Palma Serasih and Diamond Food

-0.2

Correlation Coefficient

Palma Serasih  Diamond Food

Good diversification

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

Pair Corralation between Palma Serasih and Diamond Food

Assuming the 90 days trading horizon Palma Serasih PT is expected to generate 8.84 times more return on investment than Diamond Food. However, Palma Serasih is 8.84 times more volatile than Diamond Food Indonesia. It trades about 0.02 of its potential returns per unit of risk. Diamond Food Indonesia is currently generating about -0.35 per unit of risk. If you would invest  19,000  in Palma Serasih PT on October 22, 2024 and sell it today you would earn a total of  100.00  from holding Palma Serasih PT or generate 0.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

Palma Serasih PT  vs.  Diamond Food Indonesia

Palma Serasih PT

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Palma Serasih PT are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Palma Serasih disclosed solid returns over the last few months and may actually be approaching a breakup point.

Diamond Food Indonesia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diamond Food Indonesia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Diamond Food 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 Palma Serasih and Diamond Food

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

The idea behind Palma Serasih PT and Diamond Food Indonesia 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 Stocks Directory module to find actively traded stocks across global markets.