Correlation Between Nanotech Indonesia and Sumber Mas

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

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

Diversification Opportunities for Nanotech Indonesia and Sumber Mas

-0.11

Correlation Coefficient

Nanotech Indonesia  Sumber Mas

Good diversification

The 3 months correlation between Nanotech and Sumber is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Nanotech Indonesia Global and Sumber Mas Konstruksi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumber Mas Konstruksi and Nanotech Indonesia 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 Nanotech Indonesia Global are associated (or correlated) with Sumber Mas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumber Mas Konstruksi has no effect on the direction of Nanotech Indonesia i.e., Nanotech Indonesia and Sumber Mas go up and down completely randomly.

Pair Corralation between Nanotech Indonesia and Sumber Mas

Assuming the 90 days trading horizon Nanotech Indonesia Global is expected to generate 1.4 times more return on investment than Sumber Mas. However, Nanotech Indonesia is 1.4 times more volatile than Sumber Mas Konstruksi. It trades about 0.12 of its potential returns per unit of risk. Sumber Mas Konstruksi is currently generating about -0.25 per unit of risk. If you would invest  1,800  in Nanotech Indonesia Global on September 18, 2024 and sell it today you would earn a total of  200.00  from holding Nanotech Indonesia Global or generate 11.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Nanotech Indonesia Global  vs.  Sumber Mas Konstruksi

Nanotech Indonesia Global

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nanotech Indonesia Global are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward-looking signals, Nanotech Indonesia disclosed solid returns over the last few months and may actually be approaching a breakup point.

Sumber Mas Konstruksi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sumber Mas Konstruksi 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 Nanotech Indonesia and Sumber Mas

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

The idea behind Nanotech Indonesia Global and Sumber Mas Konstruksi 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.