Correlation Between Sumber Energi and Wijaya Karya

Can any of the company-specific risk be diversified away by investing in both Sumber Energi and Wijaya Karya 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 Sumber Energi and Wijaya Karya into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sumber Energi Andalan and Wijaya Karya Beton, you can compare the effects of market volatilities on Sumber Energi and Wijaya Karya 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 Sumber Energi with a short position of Wijaya Karya. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumber Energi and Wijaya Karya.

Diversification Opportunities for Sumber Energi and Wijaya Karya

0.72

Correlation Coefficient

Sumber Energi  Wijaya Karya

Poor diversification

The 3 months correlation between Sumber and Wijaya is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Sumber Energi Andalan and Wijaya Karya Beton in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wijaya Karya Beton and Sumber Energi 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 Sumber Energi Andalan are associated (or correlated) with Wijaya Karya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wijaya Karya Beton has no effect on the direction of Sumber Energi i.e., Sumber Energi and Wijaya Karya go up and down completely randomly.

Pair Corralation between Sumber Energi and Wijaya Karya

Assuming the 90 days trading horizon Sumber Energi Andalan is expected to generate 1.05 times more return on investment than Wijaya Karya. However, Sumber Energi is 1.05 times more volatile than Wijaya Karya Beton. It trades about -0.01 of its potential returns per unit of risk. Wijaya Karya Beton is currently generating about -0.12 per unit of risk. If you would invest  78,000  in Sumber Energi Andalan on September 12, 2024 and sell it today you would lose (4,000) from holding Sumber Energi Andalan or give up 5.13% of portfolio value over 90 days.

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

Sumber Energi Andalan  vs.  Wijaya Karya Beton

Sumber Energi Andalan

Risk-Adjusted Performance

0 of 100

Very Weak

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

Wijaya Karya Beton

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wijaya Karya Beton has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Sumber Energi and Wijaya Karya

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

The idea behind Sumber Energi Andalan and Wijaya Karya Beton 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.