Correlation Between PT Utama and PT Sari

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

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

Diversification Opportunities for PT Utama and PT Sari

0.23

Correlation Coefficient

PT Utama  PT Sari

Modest diversification

The 3 months correlation between RCCC and RAFI is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding PT Utama Radar and PT Sari Kreasi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Sari Kreasi and PT Utama 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 Utama Radar are associated (or correlated) with PT Sari. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Sari Kreasi has no effect on the direction of PT Utama i.e., PT Utama and PT Sari go up and down completely randomly.

Pair Corralation between PT Utama and PT Sari

Assuming the 90 days trading horizon PT Utama is expected to generate 1.0 times less return on investment than PT Sari. But when comparing it to its historical volatility, PT Utama Radar is 1.1 times less risky than PT Sari. It trades about 0.1 of its potential returns per unit of risk. PT Sari Kreasi is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,900  in PT Sari Kreasi on September 15, 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

PT Utama Radar  vs.  PT Sari Kreasi

PT Utama Radar

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PT Utama Radar are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, PT Utama disclosed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with PT Utama and PT Sari

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

The idea behind PT Utama Radar and PT Sari Kreasi 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.