Correlation Between PT Sreeya and Polychem Indonesia

Can any of the company-specific risk be diversified away by investing in both PT Sreeya and Polychem Indonesia 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 Sreeya and Polychem Indonesia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PT Sreeya Sewu and Polychem Indonesia Tbk, you can compare the effects of market volatilities on PT Sreeya and Polychem Indonesia 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 Sreeya with a short position of Polychem Indonesia. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Sreeya and Polychem Indonesia.

Diversification Opportunities for PT Sreeya and Polychem Indonesia

0.57

Correlation Coefficient

PT Sreeya  Polychem Indonesia

Very weak diversification

The 3 months correlation between SIPD and Polychem is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding PT Sreeya Sewu and Polychem Indonesia Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polychem Indonesia Tbk and PT Sreeya 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 Sreeya Sewu are associated (or correlated) with Polychem Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polychem Indonesia Tbk has no effect on the direction of PT Sreeya i.e., PT Sreeya and Polychem Indonesia go up and down completely randomly.

Pair Corralation between PT Sreeya and Polychem Indonesia

Assuming the 90 days trading horizon PT Sreeya Sewu is expected to under-perform the Polychem Indonesia. In addition to that, PT Sreeya is 1.71 times more volatile than Polychem Indonesia Tbk. It trades about -0.08 of its total potential returns per unit of risk. Polychem Indonesia Tbk is currently generating about -0.13 per unit of volatility. If you would invest  12,900  in Polychem Indonesia Tbk on September 14, 2024 and sell it today you would lose (1,600) from holding Polychem Indonesia Tbk or give up 12.4% of portfolio value over 90 days.

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

PT Sreeya Sewu  vs.  Polychem Indonesia Tbk

PT Sreeya Sewu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Sreeya Sewu 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 January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Polychem Indonesia Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Polychem Indonesia 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 January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with PT Sreeya and Polychem Indonesia

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

The idea behind PT Sreeya Sewu and Polychem Indonesia 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.