Correlation Between RMK Energy and Sumber Mas

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

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

Diversification Opportunities for RMK Energy and Sumber Mas

0.13

Correlation Coefficient

RMK Energy  Sumber Mas

Average diversification

The 3 months correlation between RMK and Sumber is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding RMK Energy PT 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 RMK Energy 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 RMK Energy PT 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 RMK Energy i.e., RMK Energy and Sumber Mas go up and down completely randomly.

Pair Corralation between RMK Energy and Sumber Mas

Assuming the 90 days trading horizon RMK Energy PT is expected to under-perform the Sumber Mas. But the stock apears to be less risky and, when comparing its historical volatility, RMK Energy PT is 1.58 times less risky than Sumber Mas. The stock trades about -0.1 of its potential returns per unit of risk. The Sumber Mas Konstruksi is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  8,600  in Sumber Mas Konstruksi on September 18, 2024 and sell it today you would lose (1,200) from holding Sumber Mas Konstruksi or give up 13.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

RMK Energy PT  vs.  Sumber Mas Konstruksi

RMK Energy PT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RMK Energy PT 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.

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 RMK Energy and Sumber Mas

The main advantage of trading using opposite RMK Energy and Sumber Mas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RMK Energy 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 RMK Energy PT 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.