Correlation Between Eratex Djaja and Hotel Sahid

Can any of the company-specific risk be diversified away by investing in both Eratex Djaja and Hotel Sahid 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 Eratex Djaja and Hotel Sahid into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Eratex Djaja Tbk and Hotel Sahid Jaya, you can compare the effects of market volatilities on Eratex Djaja and Hotel Sahid 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 Eratex Djaja with a short position of Hotel Sahid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eratex Djaja and Hotel Sahid.

Diversification Opportunities for Eratex Djaja and Hotel Sahid

0.34

Correlation Coefficient

Eratex Djaja  Hotel Sahid

Weak diversification

The 3 months correlation between Eratex and Hotel is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Eratex Djaja Tbk and Hotel Sahid Jaya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hotel Sahid Jaya and Eratex Djaja 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 Eratex Djaja Tbk are associated (or correlated) with Hotel Sahid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hotel Sahid Jaya has no effect on the direction of Eratex Djaja i.e., Eratex Djaja and Hotel Sahid go up and down completely randomly.

Pair Corralation between Eratex Djaja and Hotel Sahid

Assuming the 90 days trading horizon Eratex Djaja Tbk is expected to under-perform the Hotel Sahid. In addition to that, Eratex Djaja is 1.94 times more volatile than Hotel Sahid Jaya. It trades about -0.03 of its total potential returns per unit of risk. Hotel Sahid Jaya is currently generating about -0.01 per unit of volatility. If you would invest  100,500  in Hotel Sahid Jaya on September 15, 2024 and sell it today you would lose (4,500) from holding Hotel Sahid Jaya or give up 4.48% of portfolio value over 90 days.

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

Eratex Djaja Tbk  vs.  Hotel Sahid Jaya

Eratex Djaja Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eratex Djaja 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.

Hotel Sahid Jaya

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hotel Sahid Jaya has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Hotel Sahid 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 Eratex Djaja and Hotel Sahid

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

The idea behind Eratex Djaja Tbk and Hotel Sahid Jaya 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.