Correlation Between Sentra Food and Satria Mega

Can any of the company-specific risk be diversified away by investing in both Sentra Food and Satria Mega 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 Satria Mega 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 Satria Mega Kencana, you can compare the effects of market volatilities on Sentra Food and Satria Mega 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 Satria Mega. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sentra Food and Satria Mega.

Diversification Opportunities for Sentra Food and Satria Mega

-0.16

Correlation Coefficient

Sentra Food  Satria Mega

Good diversification

The 3 months correlation between Sentra and Satria is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Sentra Food Indonesia and Satria Mega Kencana in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Satria Mega Kencana 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 Satria Mega. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Satria Mega Kencana has no effect on the direction of Sentra Food i.e., Sentra Food and Satria Mega go up and down completely randomly.

Pair Corralation between Sentra Food and Satria Mega

Assuming the 90 days trading horizon Sentra Food Indonesia is expected to generate 0.36 times more return on investment than Satria Mega. However, Sentra Food Indonesia is 2.81 times less risky than Satria Mega. It trades about 0.05 of its potential returns per unit of risk. Satria Mega Kencana is currently generating about -0.22 per unit of risk. If you would invest  11,600  in Sentra Food Indonesia on September 13, 2024 and sell it today you would earn a total of  100.00  from holding Sentra Food Indonesia or generate 0.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Sentra Food Indonesia  vs.  Satria Mega Kencana

Sentra Food Indonesia

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sentra Food Indonesia are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Satria Mega Kencana

Risk-Adjusted Performance

1 of 100

Weak

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

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

The idea behind Sentra Food Indonesia and Satria Mega Kencana 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 Commodity Directory module to find actively traded commodities issued by global exchanges.