Correlation Between PT Sarimelati and Ekadharma International

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

By analyzing existing cross correlation between PT Sarimelati Kencana and Ekadharma International Tbk, you can compare the effects of market volatilities on PT Sarimelati and Ekadharma International 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 Sarimelati with a short position of Ekadharma International. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Sarimelati and Ekadharma International.

Diversification Opportunities for PT Sarimelati and Ekadharma International

0.82

Correlation Coefficient

PT Sarimelati  Ekadharma International

Very poor diversification

The 3 months correlation between PZZA and Ekadharma is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding PT Sarimelati Kencana and Ekadharma International Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ekadharma International and PT Sarimelati 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 Sarimelati Kencana are associated (or correlated) with Ekadharma International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ekadharma International has no effect on the direction of PT Sarimelati i.e., PT Sarimelati and Ekadharma International go up and down completely randomly.

Pair Corralation between PT Sarimelati and Ekadharma International

Assuming the 90 days trading horizon PT Sarimelati Kencana is expected to under-perform the Ekadharma International. In addition to that, PT Sarimelati is 2.61 times more volatile than Ekadharma International Tbk. It trades about -0.34 of its total potential returns per unit of risk. Ekadharma International Tbk is currently generating about -0.1 per unit of volatility. If you would invest  23,400  in Ekadharma International Tbk on September 4, 2024 and sell it today you would lose (1,400) from holding Ekadharma International Tbk or give up 5.98% of portfolio value over 90 days.

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

PT Sarimelati Kencana  vs.  Ekadharma International Tbk

PT Sarimelati Kencana

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Sarimelati Kencana has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Ekadharma International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ekadharma International Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Ekadharma International 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 PT Sarimelati and Ekadharma International

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

The idea behind PT Sarimelati Kencana and Ekadharma International 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.