Correlation Between Ekadharma International and PT Chemstar

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

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

Diversification Opportunities for Ekadharma International and PT Chemstar

0.85

Correlation Coefficient

Ekadharma International  PT Chemstar

Very poor diversification

The 3 months correlation between Ekadharma and CHEM is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Ekadharma International Tbk and PT Chemstar Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Chemstar Indonesia and Ekadharma International 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 Ekadharma International Tbk are associated (or correlated) with PT Chemstar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Chemstar Indonesia has no effect on the direction of Ekadharma International i.e., Ekadharma International and PT Chemstar go up and down completely randomly.

Pair Corralation between Ekadharma International and PT Chemstar

Assuming the 90 days trading horizon Ekadharma International Tbk is expected to generate 0.48 times more return on investment than PT Chemstar. However, Ekadharma International Tbk is 2.1 times less risky than PT Chemstar. It trades about -0.14 of its potential returns per unit of risk. PT Chemstar Indonesia is currently generating about -0.12 per unit of risk. If you would invest  23,600  in Ekadharma International Tbk on September 16, 2024 and sell it today you would lose (1,800) from holding Ekadharma International Tbk or give up 7.63% of portfolio value over 90 days.

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

Ekadharma International Tbk  vs.  PT Chemstar Indonesia

Ekadharma International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ekadharma International Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

PT Chemstar Indonesia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Chemstar Indonesia 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 Ekadharma International and PT Chemstar

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

The idea behind Ekadharma International Tbk and PT Chemstar 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.