Correlation Between Sona Topas and Jakarta Setiabudi

Can any of the company-specific risk be diversified away by investing in both Sona Topas and Jakarta Setiabudi 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 Jakarta Setiabudi 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 Jakarta Setiabudi Internasional, you can compare the effects of market volatilities on Sona Topas and Jakarta Setiabudi 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 Jakarta Setiabudi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sona Topas and Jakarta Setiabudi.

Diversification Opportunities for Sona Topas and Jakarta Setiabudi

0.13

Correlation Coefficient

Sona Topas  Jakarta Setiabudi

Average diversification

The 3 months correlation between Sona and Jakarta is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Sona Topas Tourism and Jakarta Setiabudi Internasiona in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jakarta Setiabudi 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 Jakarta Setiabudi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jakarta Setiabudi has no effect on the direction of Sona Topas i.e., Sona Topas and Jakarta Setiabudi go up and down completely randomly.

Pair Corralation between Sona Topas and Jakarta Setiabudi

Assuming the 90 days trading horizon Sona Topas Tourism is expected to under-perform the Jakarta Setiabudi. In addition to that, Sona Topas is 1.73 times more volatile than Jakarta Setiabudi Internasional. It trades about -0.17 of its total potential returns per unit of risk. Jakarta Setiabudi Internasional is currently generating about 0.23 per unit of volatility. If you would invest  797,500  in Jakarta Setiabudi Internasional on September 27, 2024 and sell it today you would earn a total of  282,500  from holding Jakarta Setiabudi Internasional or generate 35.42% return on investment over 90 days.

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

Sona Topas Tourism  vs.  Jakarta Setiabudi Internasiona

Sona Topas Tourism

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sona Topas Tourism are ranked lower than 4 (%) 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.

Jakarta Setiabudi

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Jakarta Setiabudi Internasional are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Jakarta Setiabudi disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sona Topas and Jakarta Setiabudi

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

The idea behind Sona Topas Tourism and Jakarta Setiabudi Internasional 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.