Correlation Between Sepatu Bata and Primarindo Asia

Can any of the company-specific risk be diversified away by investing in both Sepatu Bata and Primarindo Asia 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 Sepatu Bata and Primarindo Asia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sepatu Bata Tbk and Primarindo Asia Infrastructure, you can compare the effects of market volatilities on Sepatu Bata and Primarindo Asia 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 Sepatu Bata with a short position of Primarindo Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sepatu Bata and Primarindo Asia.

Diversification Opportunities for Sepatu Bata and Primarindo Asia

0.78

Correlation Coefficient

Sepatu Bata  Primarindo Asia

Poor diversification

The 3 months correlation between Sepatu and Primarindo is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Sepatu Bata Tbk and Primarindo Asia Infrastructure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Primarindo Asia Infr and Sepatu Bata 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 Sepatu Bata Tbk are associated (or correlated) with Primarindo Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Primarindo Asia Infr has no effect on the direction of Sepatu Bata i.e., Sepatu Bata and Primarindo Asia go up and down completely randomly.

Pair Corralation between Sepatu Bata and Primarindo Asia

Assuming the 90 days trading horizon Sepatu Bata Tbk is expected to under-perform the Primarindo Asia. But the stock apears to be less risky and, when comparing its historical volatility, Sepatu Bata Tbk is 2.01 times less risky than Primarindo Asia. The stock trades about -0.17 of its potential returns per unit of risk. The Primarindo Asia Infrastructure is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  11,300  in Primarindo Asia Infrastructure on September 16, 2024 and sell it today you would lose (800.00) from holding Primarindo Asia Infrastructure or give up 7.08% of portfolio value over 90 days.

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

Sepatu Bata Tbk  vs.  Primarindo Asia Infrastructure

Sepatu Bata Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

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

Primarindo Asia Infr

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Primarindo Asia Infrastructure has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Primarindo Asia 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 Sepatu Bata and Primarindo Asia

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

The idea behind Sepatu Bata Tbk and Primarindo Asia Infrastructure 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.