Correlation Between PT Sari and Kencana Energi

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

Diversification Opportunities for PT Sari and Kencana Energi

-0.6

Correlation Coefficient

PT Sari  Kencana Energi

Excellent diversification

The 3 months correlation between RAFI and Kencana is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding PT Sari Kreasi and Kencana Energi Lestari in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kencana Energi Lestari 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 Kencana Energi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kencana Energi Lestari has no effect on the direction of PT Sari i.e., PT Sari and Kencana Energi go up and down completely randomly.

Pair Corralation between PT Sari and Kencana Energi

Assuming the 90 days trading horizon PT Sari Kreasi is expected to generate 4.18 times more return on investment than Kencana Energi. However, PT Sari is 4.18 times more volatile than Kencana Energi Lestari. It trades about 0.11 of its potential returns per unit of risk. Kencana Energi Lestari is currently generating about -0.16 per unit of risk. If you would invest  2,600  in PT Sari Kreasi on September 4, 2024 and sell it today you would earn a total of  700.00  from holding PT Sari Kreasi or generate 26.92% 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.  Kencana Energi Lestari

PT Sari Kreasi

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PT Sari Kreasi are ranked lower than 8 (%) 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.

Kencana Energi Lestari

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kencana Energi Lestari has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with PT Sari and Kencana Energi

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

The idea behind PT Sari Kreasi and Kencana Energi Lestari 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.