Correlation Between Siloam International and Indonesian Tobacco

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

By analyzing existing cross correlation between Siloam International Hospitals and Indonesian Tobacco Tbk, you can compare the effects of market volatilities on Siloam International and Indonesian Tobacco 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 Siloam International with a short position of Indonesian Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Siloam International and Indonesian Tobacco.

Diversification Opportunities for Siloam International and Indonesian Tobacco

0.67

Correlation Coefficient

Siloam International  Indonesian Tobacco

Poor diversification

The 3 months correlation between Siloam and Indonesian is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Siloam International Hospitals and Indonesian Tobacco Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indonesian Tobacco Tbk and Siloam International 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 Siloam International Hospitals are associated (or correlated) with Indonesian Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indonesian Tobacco Tbk has no effect on the direction of Siloam International i.e., Siloam International and Indonesian Tobacco go up and down completely randomly.

Pair Corralation between Siloam International and Indonesian Tobacco

Assuming the 90 days trading horizon Siloam International Hospitals is expected to generate 1.1 times more return on investment than Indonesian Tobacco. However, Siloam International is 1.1 times more volatile than Indonesian Tobacco Tbk. It trades about -0.09 of its potential returns per unit of risk. Indonesian Tobacco Tbk is currently generating about -0.16 per unit of risk. If you would invest  303,000  in Siloam International Hospitals on December 2, 2024 and sell it today you would lose (32,000) from holding Siloam International Hospitals or give up 10.56% of portfolio value over 90 days.

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

Siloam International Hospitals  vs.  Indonesian Tobacco Tbk

Siloam International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Siloam International Hospitals 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.

Indonesian Tobacco Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Indonesian Tobacco Tbk 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 April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Siloam International and Indonesian Tobacco

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

The idea behind Siloam International Hospitals and Indonesian Tobacco Tbk 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.