Correlation Between Singaraja Putra and Indonesia Fibreboard

Can any of the company-specific risk be diversified away by investing in both Singaraja Putra and Indonesia Fibreboard 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 Singaraja Putra and Indonesia Fibreboard into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Singaraja Putra and Indonesia Fibreboard Industry, you can compare the effects of market volatilities on Singaraja Putra and Indonesia Fibreboard 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 Singaraja Putra with a short position of Indonesia Fibreboard. Check out your portfolio center. Please also check ongoing floating volatility patterns of Singaraja Putra and Indonesia Fibreboard.

Diversification Opportunities for Singaraja Putra and Indonesia Fibreboard

0.67

Correlation Coefficient

Singaraja Putra  Indonesia Fibreboard

Poor diversification

The 3 months correlation between Singaraja and Indonesia is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Singaraja Putra and Indonesia Fibreboard Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indonesia Fibreboard and Singaraja Putra 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 Singaraja Putra are associated (or correlated) with Indonesia Fibreboard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indonesia Fibreboard has no effect on the direction of Singaraja Putra i.e., Singaraja Putra and Indonesia Fibreboard go up and down completely randomly.

Pair Corralation between Singaraja Putra and Indonesia Fibreboard

Assuming the 90 days trading horizon Singaraja Putra is expected to generate 2.63 times more return on investment than Indonesia Fibreboard. However, Singaraja Putra is 2.63 times more volatile than Indonesia Fibreboard Industry. It trades about 0.2 of its potential returns per unit of risk. Indonesia Fibreboard Industry is currently generating about 0.05 per unit of risk. If you would invest  246,000  in Singaraja Putra on September 19, 2024 and sell it today you would earn a total of  252,000  from holding Singaraja Putra or generate 102.44% return on investment over 90 days.

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

Singaraja Putra  vs.  Indonesia Fibreboard Industry

Singaraja Putra

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Singaraja Putra are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Singaraja Putra disclosed solid returns over the last few months and may actually be approaching a breakup point.

Indonesia Fibreboard

Risk-Adjusted Performance

4 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Indonesia Fibreboard Industry are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Indonesia Fibreboard may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Singaraja Putra and Indonesia Fibreboard

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

The idea behind Singaraja Putra and Indonesia Fibreboard Industry 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.