Correlation Between Indonesia Fibreboard and Saraswanti Anugerah

Can any of the company-specific risk be diversified away by investing in both Indonesia Fibreboard and Saraswanti Anugerah 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 Indonesia Fibreboard and Saraswanti Anugerah into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Indonesia Fibreboard Industry and Saraswanti Anugerah Makmur, you can compare the effects of market volatilities on Indonesia Fibreboard and Saraswanti Anugerah 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 Indonesia Fibreboard with a short position of Saraswanti Anugerah. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indonesia Fibreboard and Saraswanti Anugerah.

Diversification Opportunities for Indonesia Fibreboard and Saraswanti Anugerah

-0.59

Correlation Coefficient

Indonesia Fibreboard  Saraswanti Anugerah

Excellent diversification

The 3 months correlation between Indonesia and Saraswanti is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Indonesia Fibreboard Industry and Saraswanti Anugerah Makmur in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saraswanti Anugerah and Indonesia Fibreboard 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 Indonesia Fibreboard Industry are associated (or correlated) with Saraswanti Anugerah. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saraswanti Anugerah has no effect on the direction of Indonesia Fibreboard i.e., Indonesia Fibreboard and Saraswanti Anugerah go up and down completely randomly.

Pair Corralation between Indonesia Fibreboard and Saraswanti Anugerah

Assuming the 90 days trading horizon Indonesia Fibreboard Industry is expected to generate 1.88 times more return on investment than Saraswanti Anugerah. However, Indonesia Fibreboard is 1.88 times more volatile than Saraswanti Anugerah Makmur. It trades about 0.05 of its potential returns per unit of risk. Saraswanti Anugerah Makmur is currently generating about -0.03 per unit of risk. If you would invest  18,534  in Indonesia Fibreboard Industry on September 19, 2024 and sell it today you would earn a total of  1,266  from holding Indonesia Fibreboard Industry or generate 6.83% return on investment over 90 days.

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

Indonesia Fibreboard Industry  vs.  Saraswanti Anugerah Makmur

Indonesia Fibreboard

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Indonesia Fibreboard Industry are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Indonesia Fibreboard may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Saraswanti Anugerah

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Saraswanti Anugerah Makmur has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Saraswanti Anugerah 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 Indonesia Fibreboard and Saraswanti Anugerah

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

The idea behind Indonesia Fibreboard Industry and Saraswanti Anugerah Makmur 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.