Correlation Between Semen Indonesia and Capital Financial

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

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

Diversification Opportunities for Semen Indonesia and Capital Financial

-0.31

Correlation Coefficient

Semen Indonesia  Capital Financial

Very good diversification

The 3 months correlation between Semen and Capital is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Semen Indonesia Persero and Capital Financial Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Financial and Semen Indonesia 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 Semen Indonesia Persero are associated (or correlated) with Capital Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Financial has no effect on the direction of Semen Indonesia i.e., Semen Indonesia and Capital Financial go up and down completely randomly.

Pair Corralation between Semen Indonesia and Capital Financial

Assuming the 90 days trading horizon Semen Indonesia Persero is expected to under-perform the Capital Financial. But the stock apears to be less risky and, when comparing its historical volatility, Semen Indonesia Persero is 1.21 times less risky than Capital Financial. The stock trades about -0.09 of its potential returns per unit of risk. The Capital Financial Indonesia is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  50,000  in Capital Financial Indonesia on September 3, 2024 and sell it today you would earn a total of  1,000.00  from holding Capital Financial Indonesia or generate 2.0% return on investment over 90 days.

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

Semen Indonesia Persero  vs.  Capital Financial Indonesia

Semen Indonesia Persero

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Semen Indonesia Persero 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.

Capital Financial

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Financial Indonesia are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Capital Financial 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 Semen Indonesia and Capital Financial

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

The idea behind Semen Indonesia Persero and Capital Financial Indonesia 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.