Correlation Between Jaya Swarasa and Formosa Ingredient

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

By analyzing existing cross correlation between Jaya Swarasa Agung and Formosa Ingredient Factory, you can compare the effects of market volatilities on Jaya Swarasa and Formosa Ingredient 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 Jaya Swarasa with a short position of Formosa Ingredient. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jaya Swarasa and Formosa Ingredient.

Diversification Opportunities for Jaya Swarasa and Formosa Ingredient

0.37

Correlation Coefficient

Jaya Swarasa  Formosa Ingredient

Weak diversification

The 3 months correlation between Jaya and Formosa is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Jaya Swarasa Agung and Formosa Ingredient Factory in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formosa Ingredient and Jaya Swarasa 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 Jaya Swarasa Agung are associated (or correlated) with Formosa Ingredient. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formosa Ingredient has no effect on the direction of Jaya Swarasa i.e., Jaya Swarasa and Formosa Ingredient go up and down completely randomly.

Pair Corralation between Jaya Swarasa and Formosa Ingredient

Assuming the 90 days trading horizon Jaya Swarasa Agung is expected to generate 0.51 times more return on investment than Formosa Ingredient. However, Jaya Swarasa Agung is 1.96 times less risky than Formosa Ingredient. It trades about 0.0 of its potential returns per unit of risk. Formosa Ingredient Factory is currently generating about -0.06 per unit of risk. If you would invest  5,000  in Jaya Swarasa Agung on December 21, 2024 and sell it today you would earn a total of  0.00  from holding Jaya Swarasa Agung or generate 0.0% return on investment over 90 days.

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

Jaya Swarasa Agung  vs.  Formosa Ingredient Factory

Jaya Swarasa Agung

Risk-Adjusted Performance

Very Weak

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

Formosa Ingredient

Risk-Adjusted Performance

Very Weak

Over the last 90 days Formosa Ingredient Factory has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals 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 Jaya Swarasa and Formosa Ingredient

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

The idea behind Jaya Swarasa Agung and Formosa Ingredient Factory 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.