Correlation Between Sarana Meditama and Itama Ranoraya

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

By analyzing existing cross correlation between Sarana Meditama Metropolitan and Itama Ranoraya, you can compare the effects of market volatilities on Sarana Meditama and Itama Ranoraya 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 Sarana Meditama with a short position of Itama Ranoraya. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sarana Meditama and Itama Ranoraya.

Diversification Opportunities for Sarana Meditama and Itama Ranoraya

-0.13

Correlation Coefficient

Sarana Meditama  Itama Ranoraya

Good diversification

The 3 months correlation between Sarana and Itama is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Sarana Meditama Metropolitan and Itama Ranoraya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Itama Ranoraya and Sarana Meditama 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 Sarana Meditama Metropolitan are associated (or correlated) with Itama Ranoraya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Itama Ranoraya has no effect on the direction of Sarana Meditama i.e., Sarana Meditama and Itama Ranoraya go up and down completely randomly.

Pair Corralation between Sarana Meditama and Itama Ranoraya

Assuming the 90 days trading horizon Sarana Meditama Metropolitan is expected to generate 1.47 times more return on investment than Itama Ranoraya. However, Sarana Meditama is 1.47 times more volatile than Itama Ranoraya. It trades about 0.03 of its potential returns per unit of risk. Itama Ranoraya is currently generating about -0.02 per unit of risk. If you would invest  25,000  in Sarana Meditama Metropolitan on December 1, 2024 and sell it today you would earn a total of  800.00  from holding Sarana Meditama Metropolitan or generate 3.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

Sarana Meditama Metropolitan  vs.  Itama Ranoraya

Sarana Meditama Metr

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sarana Meditama Metropolitan are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Sarana Meditama may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Itama Ranoraya

Risk-Adjusted Performance

Very Weak

Over the last 90 days Itama Ranoraya has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Itama Ranoraya 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 Sarana Meditama and Itama Ranoraya

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

The idea behind Sarana Meditama Metropolitan and Itama Ranoraya 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.