Correlation Between PT Sarana and Pabrik Kertas

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

By analyzing existing cross correlation between PT Sarana Menara and Pabrik Kertas Tjiwi, you can compare the effects of market volatilities on PT Sarana and Pabrik Kertas 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 PT Sarana with a short position of Pabrik Kertas. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Sarana and Pabrik Kertas.

Diversification Opportunities for PT Sarana and Pabrik Kertas

0.86

Correlation Coefficient

PT Sarana  Pabrik Kertas

Very poor diversification

The 3 months correlation between TOWR and Pabrik is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding PT Sarana Menara and Pabrik Kertas Tjiwi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pabrik Kertas Tjiwi and PT Sarana 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 PT Sarana Menara are associated (or correlated) with Pabrik Kertas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pabrik Kertas Tjiwi has no effect on the direction of PT Sarana i.e., PT Sarana and Pabrik Kertas go up and down completely randomly.

Pair Corralation between PT Sarana and Pabrik Kertas

Assuming the 90 days trading horizon PT Sarana Menara is expected to under-perform the Pabrik Kertas. But the stock apears to be less risky and, when comparing its historical volatility, PT Sarana Menara is 1.08 times less risky than Pabrik Kertas. The stock trades about -0.15 of its potential returns per unit of risk. The Pabrik Kertas Tjiwi is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  740,000  in Pabrik Kertas Tjiwi on August 30, 2024 and sell it today you would lose (110,000) from holding Pabrik Kertas Tjiwi or give up 14.86% of portfolio value over 90 days.

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

PT Sarana Menara  vs.  Pabrik Kertas Tjiwi

PT Sarana Menara

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Sarana Menara 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 forward-looking signals remain quite persistent which may send shares a bit higher in December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pabrik Kertas Tjiwi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pabrik Kertas Tjiwi 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 forward-looking signals remain quite persistent which may send shares a bit higher in December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with PT Sarana and Pabrik Kertas

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

The idea behind PT Sarana Menara and Pabrik Kertas Tjiwi 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.