Correlation Between PT Sarimelati and PT Indonesia

Can any of the company-specific risk be diversified away by investing in both PT Sarimelati and PT Indonesia 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 PT Indonesia 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 PT Indonesia Kendaraan, you can compare the effects of market volatilities on PT Sarimelati and PT Indonesia 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 PT Indonesia. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Sarimelati and PT Indonesia.

Diversification Opportunities for PT Sarimelati and PT Indonesia

0.43

Correlation Coefficient

PT Sarimelati  PT Indonesia

Very weak diversification

The 3 months correlation between PZZA and IPCC is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding PT Sarimelati Kencana and PT Indonesia Kendaraan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Indonesia Kendaraan 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 PT Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Indonesia Kendaraan has no effect on the direction of PT Sarimelati i.e., PT Sarimelati and PT Indonesia go up and down completely randomly.

Pair Corralation between PT Sarimelati and PT Indonesia

Assuming the 90 days trading horizon PT Sarimelati Kencana is expected to under-perform the PT Indonesia. In addition to that, PT Sarimelati is 2.0 times more volatile than PT Indonesia Kendaraan. It trades about -0.07 of its total potential returns per unit of risk. PT Indonesia Kendaraan is currently generating about 0.06 per unit of volatility. If you would invest  48,171  in PT Indonesia Kendaraan on December 4, 2024 and sell it today you would earn a total of  24,329  from holding PT Indonesia Kendaraan or generate 50.51% return on investment over 90 days.

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

PT Sarimelati Kencana  vs.  PT Indonesia Kendaraan

PT Sarimelati Kencana

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PT Sarimelati Kencana are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, PT Sarimelati disclosed solid returns over the last few months and may actually be approaching a breakup point.

PT Indonesia Kendaraan

Risk-Adjusted Performance

Very Weak

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

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

The idea behind PT Sarimelati Kencana and PT Indonesia Kendaraan 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.