Correlation Between Sona Topas and Japfa Comfeed

Can any of the company-specific risk be diversified away by investing in both Sona Topas and Japfa Comfeed 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 Sona Topas and Japfa Comfeed into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sona Topas Tourism and Japfa Comfeed Indonesia, you can compare the effects of market volatilities on Sona Topas and Japfa Comfeed 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 Sona Topas with a short position of Japfa Comfeed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sona Topas and Japfa Comfeed.

Diversification Opportunities for Sona Topas and Japfa Comfeed

0.2

Correlation Coefficient

Sona Topas  Japfa Comfeed

Modest diversification

The 3 months correlation between Sona and Japfa is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Sona Topas Tourism and Japfa Comfeed Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japfa Comfeed Indonesia and Sona Topas 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 Sona Topas Tourism are associated (or correlated) with Japfa Comfeed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japfa Comfeed Indonesia has no effect on the direction of Sona Topas i.e., Sona Topas and Japfa Comfeed go up and down completely randomly.

Pair Corralation between Sona Topas and Japfa Comfeed

Assuming the 90 days trading horizon Sona Topas Tourism is expected to generate 4.67 times more return on investment than Japfa Comfeed. However, Sona Topas is 4.67 times more volatile than Japfa Comfeed Indonesia. It trades about 0.03 of its potential returns per unit of risk. Japfa Comfeed Indonesia is currently generating about 0.04 per unit of risk. If you would invest  419,000  in Sona Topas Tourism on December 29, 2024 and sell it today you would lose (48,000) from holding Sona Topas Tourism or give up 11.46% of portfolio value over 90 days.

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

Sona Topas Tourism  vs.  Japfa Comfeed Indonesia

Sona Topas Tourism

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sona Topas Tourism are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Sona Topas disclosed solid returns over the last few months and may actually be approaching a breakup point.

Japfa Comfeed Indonesia

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Japfa Comfeed Indonesia are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Japfa Comfeed 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 Sona Topas and Japfa Comfeed

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

The idea behind Sona Topas Tourism and Japfa Comfeed Indonesia 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.