Correlation Between Surya Citra and Kedawung Setia

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

By analyzing existing cross correlation between Surya Citra Media and Kedawung Setia Industrial, you can compare the effects of market volatilities on Surya Citra and Kedawung Setia 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 Surya Citra with a short position of Kedawung Setia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Surya Citra and Kedawung Setia.

Diversification Opportunities for Surya Citra and Kedawung Setia

-0.29

Correlation Coefficient

Surya Citra  Kedawung Setia

Very good diversification

The 3 months correlation between Surya and Kedawung is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Surya Citra Media and Kedawung Setia Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kedawung Setia Industrial and Surya Citra 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 Surya Citra Media are associated (or correlated) with Kedawung Setia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kedawung Setia Industrial has no effect on the direction of Surya Citra i.e., Surya Citra and Kedawung Setia go up and down completely randomly.

Pair Corralation between Surya Citra and Kedawung Setia

Assuming the 90 days trading horizon Surya Citra Media is expected to generate 0.82 times more return on investment than Kedawung Setia. However, Surya Citra Media is 1.22 times less risky than Kedawung Setia. It trades about 0.11 of its potential returns per unit of risk. Kedawung Setia Industrial is currently generating about -0.02 per unit of risk. If you would invest  16,300  in Surya Citra Media on December 21, 2024 and sell it today you would earn a total of  3,700  from holding Surya Citra Media or generate 22.7% return on investment over 90 days.

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

Surya Citra Media  vs.  Kedawung Setia Industrial

Surya Citra Media

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Surya Citra Media are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Surya Citra disclosed solid returns over the last few months and may actually be approaching a breakup point.

Kedawung Setia Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kedawung Setia Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Kedawung Setia 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 Surya Citra and Kedawung Setia

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

The idea behind Surya Citra Media and Kedawung Setia Industrial 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.