Correlation Between Prima Andalan and Sumber Global

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

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

Diversification Opportunities for Prima Andalan and Sumber Global

0.5

Correlation Coefficient

Prima Andalan  Sumber Global

Very weak diversification

The 3 months correlation between Prima and Sumber is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Prima Andalan Mandiri and Sumber Global Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumber Global Energy and Prima Andalan 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 Prima Andalan Mandiri are associated (or correlated) with Sumber Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumber Global Energy has no effect on the direction of Prima Andalan i.e., Prima Andalan and Sumber Global go up and down completely randomly.

Pair Corralation between Prima Andalan and Sumber Global

Assuming the 90 days trading horizon Prima Andalan Mandiri is expected to generate 0.29 times more return on investment than Sumber Global. However, Prima Andalan Mandiri is 3.48 times less risky than Sumber Global. It trades about -0.05 of its potential returns per unit of risk. Sumber Global Energy is currently generating about -0.1 per unit of risk. If you would invest  533,742  in Prima Andalan Mandiri on September 16, 2024 and sell it today you would lose (18,742) from holding Prima Andalan Mandiri or give up 3.51% of portfolio value over 90 days.

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

Prima Andalan Mandiri  vs.  Sumber Global Energy

Prima Andalan Mandiri

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sumber Global Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sumber Global Energy 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 Prima Andalan and Sumber Global

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

The idea behind Prima Andalan Mandiri and Sumber Global Energy 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.