Correlation Between Semen Indonesia and Petrosea Tbk

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

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

Diversification Opportunities for Semen Indonesia and Petrosea Tbk

0.09

Correlation Coefficient

Semen Indonesia  Petrosea Tbk

Significant diversification

The 3 months correlation between Semen and Petrosea is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Semen Indonesia Persero and Petrosea Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrosea Tbk and Semen Indonesia 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 Semen Indonesia Persero are associated (or correlated) with Petrosea Tbk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petrosea Tbk has no effect on the direction of Semen Indonesia i.e., Semen Indonesia and Petrosea Tbk go up and down completely randomly.

Pair Corralation between Semen Indonesia and Petrosea Tbk

Assuming the 90 days trading horizon Semen Indonesia Persero is expected to under-perform the Petrosea Tbk. But the stock apears to be less risky and, when comparing its historical volatility, Semen Indonesia Persero is 1.88 times less risky than Petrosea Tbk. The stock trades about -0.08 of its potential returns per unit of risk. The Petrosea Tbk is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  276,250  in Petrosea Tbk on December 30, 2024 and sell it today you would lose (32,250) from holding Petrosea Tbk or give up 11.67% of portfolio value over 90 days.

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

Semen Indonesia Persero  vs.  Petrosea Tbk

Semen Indonesia Persero

Risk-Adjusted Performance

Very Weak

Over the last 90 days Semen Indonesia Persero 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.

Petrosea Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Petrosea Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Petrosea Tbk 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 Semen Indonesia and Petrosea Tbk

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

The idea behind Semen Indonesia Persero and Petrosea 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.