Correlation Between Surya Toto and PT Sarimelati

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

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

Diversification Opportunities for Surya Toto and PT Sarimelati

0.42

Correlation Coefficient

Surya Toto  PT Sarimelati

Very weak diversification

The 3 months correlation between Surya and PZZA is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Surya Toto Indonesia and PT Sarimelati Kencana in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Sarimelati Kencana and Surya Toto 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 Surya Toto Indonesia are associated (or correlated) with PT Sarimelati. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Sarimelati Kencana has no effect on the direction of Surya Toto i.e., Surya Toto and PT Sarimelati go up and down completely randomly.

Pair Corralation between Surya Toto and PT Sarimelati

Assuming the 90 days trading horizon Surya Toto Indonesia is expected to under-perform the PT Sarimelati. But the stock apears to be less risky and, when comparing its historical volatility, Surya Toto Indonesia is 7.3 times less risky than PT Sarimelati. The stock trades about -0.04 of its potential returns per unit of risk. The PT Sarimelati Kencana is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  11,300  in PT Sarimelati Kencana on December 29, 2024 and sell it today you would earn a total of  300.00  from holding PT Sarimelati Kencana or generate 2.65% return on investment over 90 days.

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

Surya Toto Indonesia  vs.  PT Sarimelati Kencana

Surya Toto Indonesia

Risk-Adjusted Performance

Very Weak

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

PT Sarimelati Kencana

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PT Sarimelati Kencana are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, PT Sarimelati disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Surya Toto and PT Sarimelati

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

The idea behind Surya Toto Indonesia and PT Sarimelati Kencana 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.