Correlation Between Sinar Mas and Bank Sinarmas

Can any of the company-specific risk be diversified away by investing in both Sinar Mas and Bank Sinarmas 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 Sinar Mas and Bank Sinarmas into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sinar Mas Multiartha and Bank Sinarmas Tbk, you can compare the effects of market volatilities on Sinar Mas and Bank Sinarmas 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 Sinar Mas with a short position of Bank Sinarmas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sinar Mas and Bank Sinarmas.

Diversification Opportunities for Sinar Mas and Bank Sinarmas

0.75

Correlation Coefficient

Sinar Mas  Bank Sinarmas

Poor diversification

The 3 months correlation between Sinar and Bank is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Sinar Mas Multiartha and Bank Sinarmas Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Sinarmas Tbk and Sinar Mas 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 Sinar Mas Multiartha are associated (or correlated) with Bank Sinarmas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Sinarmas Tbk has no effect on the direction of Sinar Mas i.e., Sinar Mas and Bank Sinarmas go up and down completely randomly.

Pair Corralation between Sinar Mas and Bank Sinarmas

Assuming the 90 days trading horizon Sinar Mas Multiartha is expected to generate 0.77 times more return on investment than Bank Sinarmas. However, Sinar Mas Multiartha is 1.29 times less risky than Bank Sinarmas. It trades about 0.11 of its potential returns per unit of risk. Bank Sinarmas Tbk is currently generating about 0.06 per unit of risk. If you would invest  1,460,000  in Sinar Mas Multiartha on December 29, 2024 and sell it today you would earn a total of  90,000  from holding Sinar Mas Multiartha or generate 6.16% return on investment over 90 days.

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

Sinar Mas Multiartha  vs.  Bank Sinarmas Tbk

Sinar Mas Multiartha

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sinar Mas Multiartha are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Sinar Mas may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Bank Sinarmas Tbk

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Sinarmas Tbk are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Bank Sinarmas 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 Sinar Mas and Bank Sinarmas

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

The idea behind Sinar Mas Multiartha and Bank Sinarmas 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.