Correlation Between PT Sarimelati and Tembaga Mulia

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

Diversification Opportunities for PT Sarimelati and Tembaga Mulia

0.14

Correlation Coefficient

PT Sarimelati  Tembaga Mulia

Average diversification

The 3 months correlation between PZZA and Tembaga is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding PT Sarimelati Kencana and Tembaga Mulia Semanan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tembaga Mulia Semanan 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 Tembaga Mulia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tembaga Mulia Semanan has no effect on the direction of PT Sarimelati i.e., PT Sarimelati and Tembaga Mulia go up and down completely randomly.

Pair Corralation between PT Sarimelati and Tembaga Mulia

Assuming the 90 days trading horizon PT Sarimelati Kencana is expected to generate 4.78 times more return on investment than Tembaga Mulia. However, PT Sarimelati is 4.78 times more volatile than Tembaga Mulia Semanan. It trades about 0.04 of its potential returns per unit of risk. Tembaga Mulia Semanan is currently generating about -0.03 per unit of risk. If you would invest  11,300  in PT Sarimelati Kencana on December 30, 2024 and sell it today you would earn a total of  300.00  from holding PT Sarimelati Kencana or generate 2.65% return on investment over 90 days.

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

PT Sarimelati Kencana  vs.  Tembaga Mulia Semanan

PT Sarimelati Kencana

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PT Sarimelati Kencana are ranked lower than 3 (%) 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.

Tembaga Mulia Semanan

Risk-Adjusted Performance

Very Weak

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

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

The idea behind PT Sarimelati Kencana and Tembaga Mulia Semanan 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.