Correlation Between Jakarta Setiabudi and Itama Ranoraya

Can any of the company-specific risk be diversified away by investing in both Jakarta Setiabudi and Itama Ranoraya 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 Jakarta Setiabudi and Itama Ranoraya into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jakarta Setiabudi Internasional and Itama Ranoraya, you can compare the effects of market volatilities on Jakarta Setiabudi and Itama Ranoraya 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 Jakarta Setiabudi with a short position of Itama Ranoraya. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jakarta Setiabudi and Itama Ranoraya.

Diversification Opportunities for Jakarta Setiabudi and Itama Ranoraya

-0.86

Correlation Coefficient

Jakarta Setiabudi  Itama Ranoraya

Pay attention - limited upside

The 3 months correlation between Jakarta and Itama is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Jakarta Setiabudi Internasiona and Itama Ranoraya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Itama Ranoraya and Jakarta Setiabudi 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 Jakarta Setiabudi Internasional are associated (or correlated) with Itama Ranoraya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Itama Ranoraya has no effect on the direction of Jakarta Setiabudi i.e., Jakarta Setiabudi and Itama Ranoraya go up and down completely randomly.

Pair Corralation between Jakarta Setiabudi and Itama Ranoraya

Assuming the 90 days trading horizon Jakarta Setiabudi Internasional is expected to generate 9.93 times more return on investment than Itama Ranoraya. However, Jakarta Setiabudi is 9.93 times more volatile than Itama Ranoraya. It trades about 0.3 of its potential returns per unit of risk. Itama Ranoraya is currently generating about -0.23 per unit of risk. If you would invest  185,500  in Jakarta Setiabudi Internasional on September 18, 2024 and sell it today you would earn a total of  894,500  from holding Jakarta Setiabudi Internasional or generate 482.21% return on investment over 90 days.

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

Jakarta Setiabudi Internasiona  vs.  Itama Ranoraya

Jakarta Setiabudi

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Jakarta Setiabudi Internasional are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Jakarta Setiabudi disclosed solid returns over the last few months and may actually be approaching a breakup point.

Itama Ranoraya

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Itama Ranoraya 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 Jakarta Setiabudi and Itama Ranoraya

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

The idea behind Jakarta Setiabudi Internasional and Itama Ranoraya 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.