Correlation Between Cisarua Mountain and Sentra Food

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Can any of the company-specific risk be diversified away by investing in both Cisarua Mountain 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 Cisarua Mountain and Sentra Food 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 Sentra Food Indonesia, you can compare the effects of market volatilities on Cisarua Mountain 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 Cisarua Mountain with a short position of Sentra Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisarua Mountain and Sentra Food.

Diversification Opportunities for Cisarua Mountain and Sentra Food

CisaruaSentraDiversified AwayCisaruaSentraDiversified Away100%
0.13
  Correlation Coefficient

Average diversification

The 3 months correlation between Cisarua and Sentra is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Cisarua Mountain Dairy 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 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 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 Cisarua Mountain i.e., Cisarua Mountain and Sentra Food go up and down completely randomly.

Pair Corralation between Cisarua Mountain and Sentra Food

Assuming the 90 days trading horizon Cisarua Mountain Dairy is expected to under-perform the Sentra Food. In addition to that, Cisarua Mountain is 1.52 times more volatile than Sentra Food Indonesia. It trades about -0.04 of its total potential returns per unit of risk. Sentra Food Indonesia is currently generating about -0.02 per unit of volatility. If you would invest  12,200  in Sentra Food Indonesia on September 16, 2024 and sell it today you would lose (300.00) from holding Sentra Food Indonesia or give up 2.46% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Cisarua Mountain Dairy  vs.  Sentra Food Indonesia

 Performance 
JavaScript chart by amCharts 3.21.15OctNov -20246
JavaScript chart by amCharts 3.21.15CMRY FOOD
       Timeline  
Cisarua Mountain Dairy 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec5,2005,3005,4005,5005,6005,7005,8005,900
Sentra Food Indonesia 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec115120125130

Cisarua Mountain and Sentra Food Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-3.33-2.49-1.66-0.82-0.01370.781.62.423.244.06 0.050.100.15
JavaScript chart by amCharts 3.21.15CMRY FOOD
       Returns  

Pair Trading with Cisarua Mountain and Sentra Food

The main advantage of trading using opposite Cisarua Mountain and Sentra Food positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisarua Mountain 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 Cisarua Mountain Dairy 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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