Correlation Between PT Sari and PT Chemstar

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

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

Diversification Opportunities for PT Sari and PT Chemstar

-0.72

Correlation Coefficient

PT Sari  PT Chemstar

Pay attention - limited upside

The 3 months correlation between RAFI and CHEM is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding PT Sari Kreasi and PT Chemstar Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Chemstar Indonesia and PT Sari 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 Sari Kreasi are associated (or correlated) with PT Chemstar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Chemstar Indonesia has no effect on the direction of PT Sari i.e., PT Sari and PT Chemstar go up and down completely randomly.

Pair Corralation between PT Sari and PT Chemstar

Assuming the 90 days trading horizon PT Sari Kreasi is expected to generate 2.27 times more return on investment than PT Chemstar. However, PT Sari is 2.27 times more volatile than PT Chemstar Indonesia. It trades about 0.14 of its potential returns per unit of risk. PT Chemstar Indonesia is currently generating about -0.12 per unit of risk. If you would invest  2,500  in PT Sari Kreasi on October 11, 2024 and sell it today you would earn a total of  1,000.00  from holding PT Sari Kreasi or generate 40.0% return on investment over 90 days.

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

PT Sari Kreasi  vs.  PT Chemstar Indonesia

PT Sari Kreasi

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PT Sari Kreasi are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, PT Sari disclosed solid returns over the last few months and may actually be approaching a breakup point.

PT Chemstar Indonesia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Chemstar Indonesia 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 February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with PT Sari and PT Chemstar

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

The idea behind PT Sari Kreasi and PT Chemstar Indonesia 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.