Correlation Between Sentra Food and PT UBC

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

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

Diversification Opportunities for Sentra Food and PT UBC

0.41

Correlation Coefficient

Sentra Food  PT UBC

Very weak diversification

The 3 months correlation between Sentra and LABS is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Sentra Food Indonesia and PT UBC Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT UBC Medical and Sentra 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 Sentra Food Indonesia are associated (or correlated) with PT UBC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT UBC Medical has no effect on the direction of Sentra Food i.e., Sentra Food and PT UBC go up and down completely randomly.

Pair Corralation between Sentra Food and PT UBC

Assuming the 90 days trading horizon Sentra Food is expected to generate 5.23 times less return on investment than PT UBC. But when comparing it to its historical volatility, Sentra Food Indonesia is 2.73 times less risky than PT UBC. It trades about 0.01 of its potential returns per unit of risk. PT UBC Medical is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  13,700  in PT UBC Medical on September 15, 2024 and sell it today you would earn a total of  200.00  from holding PT UBC Medical or generate 1.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	88.1%
Values	Daily Returns

Sentra Food Indonesia  vs.  PT UBC Medical

Sentra Food Indonesia

Risk-Adjusted Performance

0 of 100

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.

PT UBC Medical

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PT UBC Medical are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, PT UBC 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 Sentra Food and PT UBC

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

The idea behind Sentra Food Indonesia and PT UBC Medical 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.