Correlation Between Semen Indonesia and Bakrie Sumatera

Can any of the company-specific risk be diversified away by investing in both Semen Indonesia and Bakrie Sumatera 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 Bakrie Sumatera 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 Bakrie Sumatera Plantations, you can compare the effects of market volatilities on Semen Indonesia and Bakrie Sumatera 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 Bakrie Sumatera. Check out your portfolio center. Please also check ongoing floating volatility patterns of Semen Indonesia and Bakrie Sumatera.

Diversification Opportunities for Semen Indonesia and Bakrie Sumatera

0.05

Correlation Coefficient

Semen Indonesia  Bakrie Sumatera

Significant diversification

The 3 months correlation between Semen and Bakrie is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Semen Indonesia Persero and Bakrie Sumatera Plantations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bakrie Sumatera Plan 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 Bakrie Sumatera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bakrie Sumatera Plan has no effect on the direction of Semen Indonesia i.e., Semen Indonesia and Bakrie Sumatera go up and down completely randomly.

Pair Corralation between Semen Indonesia and Bakrie Sumatera

Assuming the 90 days trading horizon Semen Indonesia Persero is expected to under-perform the Bakrie Sumatera. But the stock apears to be less risky and, when comparing its historical volatility, Semen Indonesia Persero is 1.03 times less risky than Bakrie Sumatera. The stock trades about -0.08 of its potential returns per unit of risk. The Bakrie Sumatera Plantations is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  9,700  in Bakrie Sumatera Plantations on December 30, 2024 and sell it today you would lose (200.00) from holding Bakrie Sumatera Plantations or give up 2.06% 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.  Bakrie Sumatera Plantations

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.

Bakrie Sumatera Plan

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bakrie Sumatera Plantations has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Bakrie Sumatera 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 Bakrie Sumatera

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

The idea behind Semen Indonesia Persero and Bakrie Sumatera Plantations 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.