Correlation Between Summarecon Agung and Mandom Indonesia

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

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

Diversification Opportunities for Summarecon Agung and Mandom Indonesia

0.62

Correlation Coefficient

Summarecon Agung  Mandom Indonesia

Poor diversification

The 3 months correlation between Summarecon and Mandom is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Summarecon Agung Tbk and Mandom Indonesia Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mandom Indonesia Tbk and Summarecon Agung 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 Summarecon Agung Tbk are associated (or correlated) with Mandom Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mandom Indonesia Tbk has no effect on the direction of Summarecon Agung i.e., Summarecon Agung and Mandom Indonesia go up and down completely randomly.

Pair Corralation between Summarecon Agung and Mandom Indonesia

Assuming the 90 days trading horizon Summarecon Agung Tbk is expected to under-perform the Mandom Indonesia. But the stock apears to be less risky and, when comparing its historical volatility, Summarecon Agung Tbk is 1.07 times less risky than Mandom Indonesia. The stock trades about -0.31 of its potential returns per unit of risk. The Mandom Indonesia Tbk is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  238,000  in Mandom Indonesia Tbk on October 21, 2024 and sell it today you would lose (40,000) from holding Mandom Indonesia Tbk or give up 16.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Summarecon Agung Tbk  vs.  Mandom Indonesia Tbk

Summarecon Agung Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

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

Mandom Indonesia Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Summarecon Agung and Mandom Indonesia

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

The idea behind Summarecon Agung Tbk and Mandom 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.