Correlation Between PT Semen and Paramount Resources

Can any of the company-specific risk be diversified away by investing in both PT Semen and Paramount Resources 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 PT Semen and Paramount Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for PT Semen and Paramount Resources

0.35

Correlation Coefficient

PT Semen  Paramount Resources

Weak diversification

The 3 months correlation between PSGTF and Paramount is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding PT Semen Indonesia and Paramount Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paramount Resources and PT Semen 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 PT Semen Indonesia are associated (or correlated) with Paramount Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paramount Resources has no effect on the direction of PT Semen i.e., PT Semen and Paramount Resources go up and down completely randomly.

Pair Corralation between PT Semen and Paramount Resources

Assuming the 90 days horizon PT Semen Indonesia is expected to generate 0.28 times more return on investment than Paramount Resources. However, PT Semen Indonesia is 3.53 times less risky than Paramount Resources. It trades about -0.13 of its potential returns per unit of risk. Paramount Resources is currently generating about -0.12 per unit of risk. If you would invest  23.00  in PT Semen Indonesia on December 21, 2024 and sell it today you would lose (3.00) from holding PT Semen Indonesia or give up 13.04% of portfolio value over 90 days.

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

PT Semen Indonesia  vs.  Paramount Resources

PT Semen Indonesia

Risk-Adjusted Performance

Very Weak

Over the last 90 days PT Semen Indonesia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Paramount Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Paramount Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with PT Semen and Paramount Resources

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

The idea behind PT Semen Indonesia and Paramount Resources 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..