Correlation Between Sumber Global and RMK Energy

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

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

Diversification Opportunities for Sumber Global and RMK Energy

0.77

Correlation Coefficient

Sumber Global  RMK Energy

Poor diversification

The 3 months correlation between Sumber and RMK is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Sumber Global Energy and RMK Energy PT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RMK Energy PT and Sumber Global 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 Sumber Global Energy are associated (or correlated) with RMK Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RMK Energy PT has no effect on the direction of Sumber Global i.e., Sumber Global and RMK Energy go up and down completely randomly.

Pair Corralation between Sumber Global and RMK Energy

Assuming the 90 days trading horizon Sumber Global Energy is expected to under-perform the RMK Energy. In addition to that, Sumber Global is 1.66 times more volatile than RMK Energy PT. It trades about -0.1 of its total potential returns per unit of risk. RMK Energy PT is currently generating about -0.08 per unit of volatility. If you would invest  57,500  in RMK Energy PT on September 16, 2024 and sell it today you would lose (6,000) from holding RMK Energy PT or give up 10.43% of portfolio value over 90 days.

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

Sumber Global Energy  vs.  RMK Energy PT

Sumber Global Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sumber Global Energy 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.

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.

Pair Trading with Sumber Global and RMK Energy

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

The idea behind Sumber Global Energy and RMK Energy 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.