Correlation Between Sri Trang and CPR Gomu

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

By analyzing existing cross correlation between Sri Trang Agro Industry and CPR Gomu Industrial, you can compare the effects of market volatilities on Sri Trang and CPR Gomu 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 Sri Trang with a short position of CPR Gomu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sri Trang and CPR Gomu.

Diversification Opportunities for Sri Trang and CPR Gomu

0.61

Correlation Coefficient

Sri Trang  CPR Gomu

Poor diversification

The 3 months correlation between Sri and CPR is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Sri Trang Agro Industry and CPR Gomu Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CPR Gomu Industrial and Sri Trang 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 Sri Trang Agro Industry are associated (or correlated) with CPR Gomu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CPR Gomu Industrial has no effect on the direction of Sri Trang i.e., Sri Trang and CPR Gomu go up and down completely randomly.

Pair Corralation between Sri Trang and CPR Gomu

Assuming the 90 days trading horizon Sri Trang Agro Industry is expected to under-perform the CPR Gomu. In addition to that, Sri Trang is 1.02 times more volatile than CPR Gomu Industrial. It trades about -0.12 of its total potential returns per unit of risk. CPR Gomu Industrial is currently generating about -0.06 per unit of volatility. If you would invest  316.00  in CPR Gomu Industrial on December 27, 2024 and sell it today you would lose (26.00) from holding CPR Gomu Industrial or give up 8.23% of portfolio value over 90 days.

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

Sri Trang Agro Industry  vs.  CPR Gomu Industrial

Sri Trang Agro

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sri Trang Agro Industry 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 basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

CPR Gomu Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days CPR Gomu Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Sri Trang and CPR Gomu

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

The idea behind Sri Trang Agro Industry and CPR Gomu Industrial 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.