Correlation Between Sumber Alfaria and PT Chemstar

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

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

Diversification Opportunities for Sumber Alfaria and PT Chemstar

0.47

Correlation Coefficient

Sumber Alfaria  PT Chemstar

Very weak diversification

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

Pair Corralation between Sumber Alfaria and PT Chemstar

Assuming the 90 days trading horizon Sumber Alfaria Trijaya is expected to generate 1.13 times more return on investment than PT Chemstar. However, Sumber Alfaria is 1.13 times more volatile than PT Chemstar Indonesia. It trades about -0.04 of its potential returns per unit of risk. PT Chemstar Indonesia is currently generating about -0.12 per unit of risk. If you would invest  315,000  in Sumber Alfaria Trijaya on September 15, 2024 and sell it today you would lose (22,000) from holding Sumber Alfaria Trijaya or give up 6.98% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Sumber Alfaria Trijaya  vs.  PT Chemstar Indonesia

Sumber Alfaria Trijaya

Risk-Adjusted Performance

0 of 100

Very Weak

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

PT Chemstar Indonesia

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sumber Alfaria and PT Chemstar

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

The idea behind Sumber Alfaria Trijaya and PT Chemstar 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.