Correlation Between Diamond Food and Sumber Tani

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

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

Diversification Opportunities for Diamond Food and Sumber Tani

0.26

Correlation Coefficient

Diamond Food  Sumber Tani

Modest diversification

The 3 months correlation between Diamond and Sumber is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Food Indonesia and Sumber Tani Agung in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumber Tani Agung and Diamond Food 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 Diamond Food Indonesia are associated (or correlated) with Sumber Tani. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumber Tani Agung has no effect on the direction of Diamond Food i.e., Diamond Food and Sumber Tani go up and down completely randomly.

Pair Corralation between Diamond Food and Sumber Tani

Assuming the 90 days trading horizon Diamond Food Indonesia is expected to under-perform the Sumber Tani. But the stock apears to be less risky and, when comparing its historical volatility, Diamond Food Indonesia is 1.05 times less risky than Sumber Tani. The stock trades about -0.04 of its potential returns per unit of risk. The Sumber Tani Agung is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  83,500  in Sumber Tani Agung on September 13, 2024 and sell it today you would earn a total of  1,500  from holding Sumber Tani Agung or generate 1.8% return on investment over 90 days.

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

Diamond Food Indonesia  vs.  Sumber Tani Agung

Diamond Food Indonesia

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sumber Tani Agung

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sumber Tani Agung are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Sumber Tani 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 Diamond Food and Sumber Tani

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

The idea behind Diamond Food Indonesia and Sumber Tani Agung 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.

Check out your portfolio center.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.