Correlation Between PT Sari and PT Cerestar

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

By analyzing existing cross correlation between PT Sari Kreasi and PT Cerestar Indonesia, you can compare the effects of market volatilities on PT Sari and PT Cerestar 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 PT Sari with a short position of PT Cerestar. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Sari and PT Cerestar.

Diversification Opportunities for PT Sari and PT Cerestar

0.48

Correlation Coefficient

PT Sari  PT Cerestar

Very weak diversification

The 3 months correlation between RAFI and TRGU is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding PT Sari Kreasi and PT Cerestar Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Cerestar Indonesia and PT Sari 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 PT Sari Kreasi are associated (or correlated) with PT Cerestar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Cerestar Indonesia has no effect on the direction of PT Sari i.e., PT Sari and PT Cerestar go up and down completely randomly.

Pair Corralation between PT Sari and PT Cerestar

Assuming the 90 days trading horizon PT Sari Kreasi is expected to generate 4.8 times more return on investment than PT Cerestar. However, PT Sari is 4.8 times more volatile than PT Cerestar Indonesia. It trades about 0.09 of its potential returns per unit of risk. PT Cerestar Indonesia is currently generating about 0.06 per unit of risk. If you would invest  2,900  in PT Sari Kreasi on September 16, 2024 and sell it today you would earn a total of  700.00  from holding PT Sari Kreasi or generate 24.14% return on investment over 90 days.

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

PT Sari Kreasi  vs.  PT Cerestar Indonesia

PT Sari Kreasi

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PT Sari Kreasi are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, PT Sari disclosed solid returns over the last few months and may actually be approaching a breakup point.

PT Cerestar Indonesia

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with PT Sari and PT Cerestar

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

The idea behind PT Sari Kreasi and PT Cerestar Indonesia 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.