Correlation Between PT Sari and PT Kusuma

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

Diversification Opportunities for PT Sari and PT Kusuma

0.63

Correlation Coefficient

PT Sari  PT Kusuma

Poor diversification

The 3 months correlation between RAFI and KKES is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding PT Sari Kreasi and PT Kusuma Kemindo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Kusuma Kemindo 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 Kusuma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Kusuma Kemindo has no effect on the direction of PT Sari i.e., PT Sari and PT Kusuma go up and down completely randomly.

Pair Corralation between PT Sari and PT Kusuma

Assuming the 90 days trading horizon PT Sari is expected to generate 7.28 times less return on investment than PT Kusuma. But when comparing it to its historical volatility, PT Sari Kreasi is 1.15 times less risky than PT Kusuma. It trades about 0.02 of its potential returns per unit of risk. PT Kusuma Kemindo is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,200  in PT Kusuma Kemindo on December 1, 2024 and sell it today you would earn a total of  400.00  from holding PT Kusuma Kemindo or generate 18.18% return on investment over 90 days.

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

PT Sari Kreasi  vs.  PT Kusuma Kemindo

PT Sari Kreasi

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PT Sari Kreasi are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, PT Sari is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

PT Kusuma Kemindo

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PT Kusuma Kemindo are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, PT Kusuma disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Sari and PT Kusuma

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

The idea behind PT Sari Kreasi and PT Kusuma Kemindo 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.