Correlation Between Cisarua Mountain and Cisadane Sawit

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

By analyzing existing cross correlation between Cisarua Mountain Dairy and Cisadane Sawit Raya, you can compare the effects of market volatilities on Cisarua Mountain and Cisadane Sawit 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 Cisarua Mountain with a short position of Cisadane Sawit. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisarua Mountain and Cisadane Sawit.

Diversification Opportunities for Cisarua Mountain and Cisadane Sawit

-0.19

Correlation Coefficient

Cisarua Mountain  Cisadane Sawit

Good diversification

The 3 months correlation between Cisarua and Cisadane is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Cisarua Mountain Dairy and Cisadane Sawit Raya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cisadane Sawit Raya and Cisarua Mountain 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 Cisarua Mountain Dairy are associated (or correlated) with Cisadane Sawit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cisadane Sawit Raya has no effect on the direction of Cisarua Mountain i.e., Cisarua Mountain and Cisadane Sawit go up and down completely randomly.

Pair Corralation between Cisarua Mountain and Cisadane Sawit

Assuming the 90 days trading horizon Cisarua Mountain Dairy is expected to under-perform the Cisadane Sawit. In addition to that, Cisarua Mountain is 1.25 times more volatile than Cisadane Sawit Raya. It trades about -0.04 of its total potential returns per unit of risk. Cisadane Sawit Raya is currently generating about 0.2 per unit of volatility. If you would invest  60,500  in Cisadane Sawit Raya on September 17, 2024 and sell it today you would earn a total of  14,000  from holding Cisadane Sawit Raya or generate 23.14% return on investment over 90 days.

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

Cisarua Mountain Dairy  vs.  Cisadane Sawit Raya

Cisarua Mountain Dairy

Risk-Adjusted Performance

0 of 100

Very Weak

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

Cisadane Sawit Raya

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cisadane Sawit Raya are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Cisadane Sawit disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cisarua Mountain and Cisadane Sawit

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

The idea behind Cisarua Mountain Dairy and Cisadane Sawit Raya 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.