Correlation Between PT Citra and Sepatu Bata

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

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

Diversification Opportunities for PT Citra and Sepatu Bata

-0.39

Correlation Coefficient

PT Citra  Sepatu Bata

Very good diversification

The 3 months correlation between CTBN and Sepatu is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding PT Citra Tubindo and Sepatu Bata Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sepatu Bata Tbk and PT Citra 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 PT Citra Tubindo are associated (or correlated) with Sepatu Bata. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sepatu Bata Tbk has no effect on the direction of PT Citra i.e., PT Citra and Sepatu Bata go up and down completely randomly.

Pair Corralation between PT Citra and Sepatu Bata

Assuming the 90 days trading horizon PT Citra Tubindo is expected to generate 3.1 times more return on investment than Sepatu Bata. However, PT Citra is 3.1 times more volatile than Sepatu Bata Tbk. It trades about 0.1 of its potential returns per unit of risk. Sepatu Bata Tbk is currently generating about -0.17 per unit of risk. If you would invest  220,000  in PT Citra Tubindo on September 16, 2024 and sell it today you would earn a total of  60,000  from holding PT Citra Tubindo or generate 27.27% return on investment over 90 days.

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

PT Citra Tubindo  vs.  Sepatu Bata Tbk

PT Citra Tubindo

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PT Citra Tubindo are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, PT Citra disclosed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with PT Citra and Sepatu Bata

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

The idea behind PT Citra Tubindo and Sepatu Bata 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.