Correlation Between Pyridam Farma and Sekar Bumi

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

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

Diversification Opportunities for Pyridam Farma and Sekar Bumi

0.81

Correlation Coefficient

Pyridam Farma  Sekar Bumi

Very poor diversification

The 3 months correlation between Pyridam and Sekar is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Pyridam Farma Tbk and Sekar Bumi Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sekar Bumi Tbk and Pyridam Farma 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 Pyridam Farma Tbk are associated (or correlated) with Sekar Bumi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sekar Bumi Tbk has no effect on the direction of Pyridam Farma i.e., Pyridam Farma and Sekar Bumi go up and down completely randomly.

Pair Corralation between Pyridam Farma and Sekar Bumi

Assuming the 90 days trading horizon Pyridam Farma Tbk is expected to generate 1.09 times more return on investment than Sekar Bumi. However, Pyridam Farma is 1.09 times more volatile than Sekar Bumi Tbk. It trades about 0.24 of its potential returns per unit of risk. Sekar Bumi Tbk is currently generating about 0.07 per unit of risk. If you would invest  10,900  in Pyridam Farma Tbk on August 31, 2024 and sell it today you would earn a total of  15,100  from holding Pyridam Farma Tbk or generate 138.53% return on investment over 90 days.

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

Pyridam Farma Tbk  vs.  Sekar Bumi Tbk

Pyridam Farma Tbk

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pyridam Farma Tbk are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Pyridam Farma disclosed solid returns over the last few months and may actually be approaching a breakup point.

Sekar Bumi Tbk

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sekar Bumi Tbk are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Sekar Bumi disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pyridam Farma and Sekar Bumi

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

The idea behind Pyridam Farma Tbk and Sekar Bumi 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.