Correlation Between Wahana Pronatural and Steady Safe

Can any of the company-specific risk be diversified away by investing in both Wahana Pronatural and Steady Safe 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 Wahana Pronatural and Steady Safe into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Wahana Pronatural and Steady Safe TBK, you can compare the effects of market volatilities on Wahana Pronatural and Steady Safe 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 Wahana Pronatural with a short position of Steady Safe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wahana Pronatural and Steady Safe.

Diversification Opportunities for Wahana Pronatural and Steady Safe

-0.16

Correlation Coefficient

Wahana Pronatural  Steady Safe

Good diversification

The 3 months correlation between Wahana and Steady is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Wahana Pronatural and Steady Safe TBK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steady Safe TBK and Wahana Pronatural 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 Wahana Pronatural are associated (or correlated) with Steady Safe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steady Safe TBK has no effect on the direction of Wahana Pronatural i.e., Wahana Pronatural and Steady Safe go up and down completely randomly.

Pair Corralation between Wahana Pronatural and Steady Safe

Assuming the 90 days trading horizon Wahana Pronatural is expected to generate 7.45 times less return on investment than Steady Safe. But when comparing it to its historical volatility, Wahana Pronatural is 1.07 times less risky than Steady Safe. It trades about 0.01 of its potential returns per unit of risk. Steady Safe TBK is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  19,800  in Steady Safe TBK on December 30, 2024 and sell it today you would earn a total of  2,200  from holding Steady Safe TBK or generate 11.11% return on investment over 90 days.

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

Wahana Pronatural  vs.  Steady Safe TBK

Wahana Pronatural

Risk-Adjusted Performance

Very Weak

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

Steady Safe TBK

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Steady Safe TBK are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Steady Safe disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wahana Pronatural and Steady Safe

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

The idea behind Wahana Pronatural and Steady Safe TBK 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.