Correlation Between Hotel Sahid and Integra Indocabinet

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

By analyzing existing cross correlation between Hotel Sahid Jaya and Integra Indocabinet Tbk, you can compare the effects of market volatilities on Hotel Sahid and Integra Indocabinet 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 Hotel Sahid with a short position of Integra Indocabinet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hotel Sahid and Integra Indocabinet.

Diversification Opportunities for Hotel Sahid and Integra Indocabinet

-0.42

Correlation Coefficient

Hotel Sahid  Integra Indocabinet

Very good diversification

The 3 months correlation between Hotel and Integra is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Hotel Sahid Jaya and Integra Indocabinet Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Integra Indocabinet Tbk and Hotel Sahid 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 Hotel Sahid Jaya are associated (or correlated) with Integra Indocabinet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Integra Indocabinet Tbk has no effect on the direction of Hotel Sahid i.e., Hotel Sahid and Integra Indocabinet go up and down completely randomly.

Pair Corralation between Hotel Sahid and Integra Indocabinet

Assuming the 90 days trading horizon Hotel Sahid Jaya is expected to under-perform the Integra Indocabinet. But the stock apears to be less risky and, when comparing its historical volatility, Hotel Sahid Jaya is 1.59 times less risky than Integra Indocabinet. The stock trades about -0.02 of its potential returns per unit of risk. The Integra Indocabinet Tbk is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  23,800  in Integra Indocabinet Tbk on September 14, 2024 and sell it today you would earn a total of  11,400  from holding Integra Indocabinet Tbk or generate 47.9% return on investment over 90 days.

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

Hotel Sahid Jaya  vs.  Integra Indocabinet Tbk

Hotel Sahid Jaya

Risk-Adjusted Performance

0 of 100

Very Weak

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

Integra Indocabinet Tbk

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Integra Indocabinet Tbk are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Integra Indocabinet disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hotel Sahid and Integra Indocabinet

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

The idea behind Hotel Sahid Jaya and Integra Indocabinet Tbk 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.