Correlation Between Provident Agro and Siantar Top

Can any of the company-specific risk be diversified away by investing in both Provident Agro and Siantar Top 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 Provident Agro and Siantar Top into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Provident Agro Tbk and Siantar Top Tbk, you can compare the effects of market volatilities on Provident Agro and Siantar Top 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 Provident Agro with a short position of Siantar Top. Check out your portfolio center. Please also check ongoing floating volatility patterns of Provident Agro and Siantar Top.

Diversification Opportunities for Provident Agro and Siantar Top

0.41

Correlation Coefficient

Provident Agro  Siantar Top

Very weak diversification

The 3 months correlation between Provident and Siantar is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Provident Agro Tbk and Siantar Top Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siantar Top Tbk and Provident Agro 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 Provident Agro Tbk are associated (or correlated) with Siantar Top. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siantar Top Tbk has no effect on the direction of Provident Agro i.e., Provident Agro and Siantar Top go up and down completely randomly.

Pair Corralation between Provident Agro and Siantar Top

Assuming the 90 days trading horizon Provident Agro Tbk is expected to generate 1.04 times more return on investment than Siantar Top. However, Provident Agro is 1.04 times more volatile than Siantar Top Tbk. It trades about -0.07 of its potential returns per unit of risk. Siantar Top Tbk is currently generating about -0.16 per unit of risk. If you would invest  39,400  in Provident Agro Tbk on September 16, 2024 and sell it today you would lose (3,000) from holding Provident Agro Tbk or give up 7.61% of portfolio value over 90 days.

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

Provident Agro Tbk  vs.  Siantar Top Tbk

Provident Agro Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Provident Agro 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.

Siantar Top Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Siantar Top Tbk 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 Provident Agro and Siantar Top

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

The idea behind Provident Agro Tbk and Siantar Top 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 Commodity Directory module to find actively traded commodities issued by global exchanges.