Correlation Between Sumi Indo and Kabelindo Murni

Can any of the company-specific risk be diversified away by investing in both Sumi Indo and Kabelindo Murni 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 Sumi Indo and Kabelindo Murni into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sumi Indo Kabel and Kabelindo Murni Tbk, you can compare the effects of market volatilities on Sumi Indo and Kabelindo Murni 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 Sumi Indo with a short position of Kabelindo Murni. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumi Indo and Kabelindo Murni.

Diversification Opportunities for Sumi Indo and Kabelindo Murni

0.76

Correlation Coefficient

Sumi Indo  Kabelindo Murni

Poor diversification

The 3 months correlation between Sumi and Kabelindo is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Sumi Indo Kabel and Kabelindo Murni Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kabelindo Murni Tbk and Sumi Indo 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 Sumi Indo Kabel are associated (or correlated) with Kabelindo Murni. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kabelindo Murni Tbk has no effect on the direction of Sumi Indo i.e., Sumi Indo and Kabelindo Murni go up and down completely randomly.

Pair Corralation between Sumi Indo and Kabelindo Murni

Assuming the 90 days trading horizon Sumi Indo Kabel is expected to generate 0.78 times more return on investment than Kabelindo Murni. However, Sumi Indo Kabel is 1.28 times less risky than Kabelindo Murni. It trades about -0.07 of its potential returns per unit of risk. Kabelindo Murni Tbk is currently generating about -0.09 per unit of risk. If you would invest  42,800  in Sumi Indo Kabel on September 12, 2024 and sell it today you would lose (2,400) from holding Sumi Indo Kabel or give up 5.61% of portfolio value over 90 days.

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

Sumi Indo Kabel  vs.  Kabelindo Murni Tbk

Sumi Indo Kabel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sumi Indo Kabel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Sumi Indo is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Kabelindo Murni Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kabelindo Murni 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.

Pair Trading with Sumi Indo and Kabelindo Murni

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

The idea behind Sumi Indo Kabel and Kabelindo Murni Tbk 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.