Correlation Between PT Soho and Itama Ranoraya

Can any of the company-specific risk be diversified away by investing in both PT Soho and Itama Ranoraya 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 PT Soho and Itama Ranoraya into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PT Soho Global and Itama Ranoraya, you can compare the effects of market volatilities on PT Soho and Itama Ranoraya 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 PT Soho with a short position of Itama Ranoraya. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Soho and Itama Ranoraya.

Diversification Opportunities for PT Soho and Itama Ranoraya

-0.58

Correlation Coefficient

PT Soho  Itama Ranoraya

Excellent diversification

The 3 months correlation between SOHO and Itama is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding PT Soho Global and Itama Ranoraya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Itama Ranoraya and PT Soho 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 PT Soho Global are associated (or correlated) with Itama Ranoraya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Itama Ranoraya has no effect on the direction of PT Soho i.e., PT Soho and Itama Ranoraya go up and down completely randomly.

Pair Corralation between PT Soho and Itama Ranoraya

Assuming the 90 days trading horizon PT Soho Global is expected to generate 1.12 times more return on investment than Itama Ranoraya. However, PT Soho is 1.12 times more volatile than Itama Ranoraya. It trades about -0.2 of its potential returns per unit of risk. Itama Ranoraya is currently generating about -0.48 per unit of risk. If you would invest  69,500  in PT Soho Global on September 1, 2024 and sell it today you would lose (3,500) from holding PT Soho Global or give up 5.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

PT Soho Global  vs.  Itama Ranoraya

PT Soho Global

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PT Soho Global are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, PT Soho is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Itama Ranoraya

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Itama Ranoraya 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 December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with PT Soho and Itama Ranoraya

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

The idea behind PT Soho Global and Itama Ranoraya 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.

Check out your portfolio center.

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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.