Correlation Between Perusahaan Gas and Samindo Resources

Can any of the company-specific risk be diversified away by investing in both Perusahaan Gas and Samindo Resources 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 Perusahaan Gas and Samindo Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Perusahaan Gas Negara and Samindo Resources Tbk, you can compare the effects of market volatilities on Perusahaan Gas and Samindo Resources 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 Perusahaan Gas with a short position of Samindo Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Perusahaan Gas and Samindo Resources.

Diversification Opportunities for Perusahaan Gas and Samindo Resources

0.68

Correlation Coefficient

Perusahaan Gas  Samindo Resources

Poor diversification

The 3 months correlation between Perusahaan and Samindo is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Perusahaan Gas Negara and Samindo Resources Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samindo Resources Tbk and Perusahaan Gas 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 Perusahaan Gas Negara are associated (or correlated) with Samindo Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samindo Resources Tbk has no effect on the direction of Perusahaan Gas i.e., Perusahaan Gas and Samindo Resources go up and down completely randomly.

Pair Corralation between Perusahaan Gas and Samindo Resources

Assuming the 90 days trading horizon Perusahaan Gas is expected to generate 5.11 times less return on investment than Samindo Resources. But when comparing it to its historical volatility, Perusahaan Gas Negara is 1.49 times less risky than Samindo Resources. It trades about 0.05 of its potential returns per unit of risk. Samindo Resources Tbk is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  130,500  in Samindo Resources Tbk on September 27, 2024 and sell it today you would earn a total of  42,500  from holding Samindo Resources Tbk or generate 32.57% return on investment over 90 days.

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

Perusahaan Gas Negara  vs.  Samindo Resources Tbk

Perusahaan Gas Negara

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Perusahaan Gas Negara are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Perusahaan Gas is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Samindo Resources Tbk

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Samindo Resources Tbk are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Samindo Resources disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Perusahaan Gas and Samindo Resources

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

The idea behind Perusahaan Gas Negara and Samindo Resources 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.