Correlation Between Tunas Baru and PT Sreeya

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

By analyzing existing cross correlation between Tunas Baru Lampung and PT Sreeya Sewu, you can compare the effects of market volatilities on Tunas Baru and PT Sreeya 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 Tunas Baru with a short position of PT Sreeya. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tunas Baru and PT Sreeya.

Diversification Opportunities for Tunas Baru and PT Sreeya

-0.58

Correlation Coefficient

Tunas Baru  PT Sreeya

Excellent diversification

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

Pair Corralation between Tunas Baru and PT Sreeya

Assuming the 90 days trading horizon Tunas Baru Lampung is expected to under-perform the PT Sreeya. But the stock apears to be less risky and, when comparing its historical volatility, Tunas Baru Lampung is 3.4 times less risky than PT Sreeya. The stock trades about -0.06 of its potential returns per unit of risk. The PT Sreeya Sewu is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  86,000  in PT Sreeya Sewu on September 1, 2024 and sell it today you would earn a total of  1,000.00  from holding PT Sreeya Sewu or generate 1.16% return on investment over 90 days.

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

Tunas Baru Lampung  vs.  PT Sreeya Sewu

Tunas Baru Lampung

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tunas Baru Lampung are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Tunas Baru is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

PT Sreeya Sewu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Sreeya Sewu 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 Tunas Baru and PT Sreeya

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

The idea behind Tunas Baru Lampung and PT Sreeya Sewu 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.