Correlation Between Sawit Sumbermas and Cisadane Sawit

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

By analyzing existing cross correlation between Sawit Sumbermas Sarana and Cisadane Sawit Raya, you can compare the effects of market volatilities on Sawit Sumbermas and Cisadane Sawit 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 Sawit Sumbermas with a short position of Cisadane Sawit. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sawit Sumbermas and Cisadane Sawit.

Diversification Opportunities for Sawit Sumbermas and Cisadane Sawit

-0.63

Correlation Coefficient

Sawit Sumbermas  Cisadane Sawit

Excellent diversification

The 3 months correlation between Sawit and Cisadane is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Sawit Sumbermas Sarana and Cisadane Sawit Raya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cisadane Sawit Raya and Sawit Sumbermas 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 Sawit Sumbermas Sarana are associated (or correlated) with Cisadane Sawit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cisadane Sawit Raya has no effect on the direction of Sawit Sumbermas i.e., Sawit Sumbermas and Cisadane Sawit go up and down completely randomly.

Pair Corralation between Sawit Sumbermas and Cisadane Sawit

Assuming the 90 days trading horizon Sawit Sumbermas Sarana is expected to under-perform the Cisadane Sawit. In addition to that, Sawit Sumbermas is 3.41 times more volatile than Cisadane Sawit Raya. It trades about -0.27 of its total potential returns per unit of risk. Cisadane Sawit Raya is currently generating about -0.05 per unit of volatility. If you would invest  70,000  in Cisadane Sawit Raya on December 4, 2024 and sell it today you would lose (1,500) from holding Cisadane Sawit Raya or give up 2.14% of portfolio value over 90 days.

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

Sawit Sumbermas Sarana  vs.  Cisadane Sawit Raya

Sawit Sumbermas Sarana

Risk-Adjusted Performance

Good

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

Cisadane Sawit Raya

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Sawit Sumbermas and Cisadane Sawit

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

The idea behind Sawit Sumbermas Sarana and Cisadane Sawit Raya 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.