Correlation Between Unilever Indonesia and Sawit Sumbermas

Can any of the company-specific risk be diversified away by investing in both Unilever Indonesia and Sawit Sumbermas 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 Unilever Indonesia and Sawit Sumbermas into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Unilever Indonesia Tbk and Sawit Sumbermas Sarana, you can compare the effects of market volatilities on Unilever Indonesia and Sawit Sumbermas 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 Unilever Indonesia with a short position of Sawit Sumbermas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Unilever Indonesia and Sawit Sumbermas.

Diversification Opportunities for Unilever Indonesia and Sawit Sumbermas

-0.47

Correlation Coefficient

Unilever Indonesia  Sawit Sumbermas

Very good diversification

The 3 months correlation between Unilever and Sawit is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Unilever Indonesia Tbk and Sawit Sumbermas Sarana in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sawit Sumbermas Sarana and Unilever Indonesia 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 Unilever Indonesia Tbk are associated (or correlated) with Sawit Sumbermas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sawit Sumbermas Sarana has no effect on the direction of Unilever Indonesia i.e., Unilever Indonesia and Sawit Sumbermas go up and down completely randomly.

Pair Corralation between Unilever Indonesia and Sawit Sumbermas

Assuming the 90 days trading horizon Unilever Indonesia Tbk is expected to under-perform the Sawit Sumbermas. But the stock apears to be less risky and, when comparing its historical volatility, Unilever Indonesia Tbk is 1.54 times less risky than Sawit Sumbermas. The stock trades about -0.15 of its potential returns per unit of risk. The Sawit Sumbermas Sarana is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  130,000  in Sawit Sumbermas Sarana on December 30, 2024 and sell it today you would earn a total of  30,500  from holding Sawit Sumbermas Sarana or generate 23.46% return on investment over 90 days.

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

Unilever Indonesia Tbk  vs.  Sawit Sumbermas Sarana

Unilever Indonesia Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Unilever Indonesia Tbk 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 April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Sawit Sumbermas Sarana

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sawit Sumbermas Sarana are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Sawit Sumbermas disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Unilever Indonesia and Sawit Sumbermas

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

The idea behind Unilever Indonesia Tbk and Sawit Sumbermas Sarana 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.