Correlation Between Selamat Sempurna and Prodia Widyahusada

Can any of the company-specific risk be diversified away by investing in both Selamat Sempurna and Prodia Widyahusada 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 Selamat Sempurna and Prodia Widyahusada into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Selamat Sempurna and Prodia Widyahusada

0.81

Correlation Coefficient

Selamat Sempurna  Prodia Widyahusada

Very poor diversification

The 3 months correlation between Selamat and Prodia is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Selamat Sempurna Tbk and Prodia Widyahusada Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prodia Widyahusada Tbk and Selamat Sempurna 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 Selamat Sempurna Tbk are associated (or correlated) with Prodia Widyahusada. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prodia Widyahusada Tbk has no effect on the direction of Selamat Sempurna i.e., Selamat Sempurna and Prodia Widyahusada go up and down completely randomly.

Pair Corralation between Selamat Sempurna and Prodia Widyahusada

Assuming the 90 days trading horizon Selamat Sempurna Tbk is expected to under-perform the Prodia Widyahusada. But the stock apears to be less risky and, when comparing its historical volatility, Selamat Sempurna Tbk is 1.1 times less risky than Prodia Widyahusada. The stock trades about -0.17 of its potential returns per unit of risk. The Prodia Widyahusada Tbk is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  268,000  in Prodia Widyahusada Tbk on December 23, 2024 and sell it today you would lose (10,000) from holding Prodia Widyahusada Tbk or give up 3.73% of portfolio value over 90 days.

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

Selamat Sempurna Tbk  vs.  Prodia Widyahusada Tbk

Selamat Sempurna Tbk

Risk-Adjusted Performance

Very Weak

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

Prodia Widyahusada Tbk

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Selamat Sempurna Tbk and Prodia Widyahusada 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.