Correlation Between PT Surya and PT Boston

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

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

Diversification Opportunities for PT Surya and PT Boston

-0.58

Correlation Coefficient

PT Surya  PT Boston

Excellent diversification

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

Pair Corralation between PT Surya and PT Boston

Assuming the 90 days trading horizon PT Surya Pertiwi is expected to under-perform the PT Boston. But the stock apears to be less risky and, when comparing its historical volatility, PT Surya Pertiwi is 4.1 times less risky than PT Boston. The stock trades about -0.06 of its potential returns per unit of risk. The PT Boston Furniture is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  4,600  in PT Boston Furniture on December 29, 2024 and sell it today you would earn a total of  2,100  from holding PT Boston Furniture or generate 45.65% return on investment over 90 days.

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

PT Surya Pertiwi  vs.  PT Boston Furniture

PT Surya Pertiwi

Risk-Adjusted Performance

Very Weak

Over the last 90 days PT Surya Pertiwi has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, PT Surya is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

PT Boston Furniture

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PT Boston Furniture are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, PT Boston disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Surya and PT Boston

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

The idea behind PT Surya Pertiwi and PT Boston Furniture 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.