Correlation Between Trimegah Karya and Sentra Food

Can any of the company-specific risk be diversified away by investing in both Trimegah Karya and Sentra Food 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 Trimegah Karya and Sentra Food into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Trimegah Karya Pratama and Sentra Food Indonesia, you can compare the effects of market volatilities on Trimegah Karya and Sentra Food 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 Trimegah Karya with a short position of Sentra Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trimegah Karya and Sentra Food.

Diversification Opportunities for Trimegah Karya and Sentra Food

-0.61

Correlation Coefficient

Trimegah Karya  Sentra Food

Excellent diversification

The 3 months correlation between Trimegah and Sentra is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Trimegah Karya Pratama and Sentra Food Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sentra Food Indonesia and Trimegah Karya 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 Trimegah Karya Pratama are associated (or correlated) with Sentra Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sentra Food Indonesia has no effect on the direction of Trimegah Karya i.e., Trimegah Karya and Sentra Food go up and down completely randomly.

Pair Corralation between Trimegah Karya and Sentra Food

Assuming the 90 days trading horizon Trimegah Karya Pratama is expected to generate 5.04 times more return on investment than Sentra Food. However, Trimegah Karya is 5.04 times more volatile than Sentra Food Indonesia. It trades about 0.09 of its potential returns per unit of risk. Sentra Food Indonesia is currently generating about -0.05 per unit of risk. If you would invest  5,700  in Trimegah Karya Pratama on December 31, 2024 and sell it today you would earn a total of  1,600  from holding Trimegah Karya Pratama or generate 28.07% return on investment over 90 days.

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

Trimegah Karya Pratama  vs.  Sentra Food Indonesia

Trimegah Karya Pratama

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Trimegah Karya Pratama are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Trimegah Karya disclosed solid returns over the last few months and may actually be approaching a breakup point.

Sentra Food Indonesia

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Trimegah Karya and Sentra Food

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

The idea behind Trimegah Karya Pratama and Sentra Food Indonesia 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 Global Correlations module to find global opportunities by holding instruments from different markets.