Correlation Between Sido Muncul and Perusahaan Gas

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

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

Diversification Opportunities for Sido Muncul and Perusahaan Gas

-0.4

Correlation Coefficient

Sido Muncul  Perusahaan Gas

Very good diversification

The 3 months correlation between Sido and Perusahaan is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Sido Muncul PT and Perusahaan Gas Negara in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perusahaan Gas Negara and Sido Muncul 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 Sido Muncul PT are associated (or correlated) with Perusahaan Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perusahaan Gas Negara has no effect on the direction of Sido Muncul i.e., Sido Muncul and Perusahaan Gas go up and down completely randomly.

Pair Corralation between Sido Muncul and Perusahaan Gas

Assuming the 90 days trading horizon Sido Muncul PT is expected to under-perform the Perusahaan Gas. In addition to that, Sido Muncul is 1.05 times more volatile than Perusahaan Gas Negara. It trades about -0.12 of its total potential returns per unit of risk. Perusahaan Gas Negara is currently generating about 0.05 per unit of volatility. If you would invest  148,000  in Perusahaan Gas Negara on September 26, 2024 and sell it today you would earn a total of  7,500  from holding Perusahaan Gas Negara or generate 5.07% return on investment over 90 days.

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

Sido Muncul PT  vs.  Perusahaan Gas Negara

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.

Perusahaan Gas Negara

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Perusahaan Gas Negara are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Perusahaan Gas is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Sido Muncul and Perusahaan Gas

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

The idea behind Sido Muncul PT and Perusahaan Gas Negara 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.