Correlation Between Nippon Indosari and Sido Muncul

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

By analyzing existing cross correlation between Nippon Indosari Corpindo and Sido Muncul PT, you can compare the effects of market volatilities on Nippon Indosari and Sido Muncul 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 Nippon Indosari with a short position of Sido Muncul. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nippon Indosari and Sido Muncul.

Diversification Opportunities for Nippon Indosari and Sido Muncul

0.76

Correlation Coefficient

Nippon Indosari  Sido Muncul

Poor diversification

The 3 months correlation between Nippon and Sido is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Indosari Corpindo and Sido Muncul PT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sido Muncul PT and Nippon Indosari 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 Nippon Indosari Corpindo are associated (or correlated) with Sido Muncul. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sido Muncul PT has no effect on the direction of Nippon Indosari i.e., Nippon Indosari and Sido Muncul go up and down completely randomly.

Pair Corralation between Nippon Indosari and Sido Muncul

Assuming the 90 days trading horizon Nippon Indosari Corpindo is expected to under-perform the Sido Muncul. But the stock apears to be less risky and, when comparing its historical volatility, Nippon Indosari Corpindo is 1.21 times less risky than Sido Muncul. The stock trades about -0.01 of its potential returns per unit of risk. The Sido Muncul PT is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  66,275  in Sido Muncul PT on September 26, 2024 and sell it today you would lose (10,275) from holding Sido Muncul PT or give up 15.5% of portfolio value over 90 days.

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

Nippon Indosari Corpindo  vs.  Sido Muncul PT

Nippon Indosari Corpindo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nippon Indosari Corpindo has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Nippon Indosari is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Sido Muncul PT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sido Muncul PT 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 Nippon Indosari and Sido Muncul

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

The idea behind Nippon Indosari Corpindo and Sido Muncul PT 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.