Correlation Between Semen Indonesia and Unilever Indonesia

Can any of the company-specific risk be diversified away by investing in both Semen Indonesia and Unilever Indonesia 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 Unilever Indonesia 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 Unilever Indonesia Tbk, you can compare the effects of market volatilities on Semen Indonesia and Unilever Indonesia 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 Unilever Indonesia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Semen Indonesia and Unilever Indonesia.

Diversification Opportunities for Semen Indonesia and Unilever Indonesia

0.8

Correlation Coefficient

Semen Indonesia  Unilever Indonesia

Very poor diversification

The 3 months correlation between Semen and Unilever is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Semen Indonesia Persero and Unilever Indonesia Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unilever Indonesia Tbk 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 Unilever Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unilever Indonesia Tbk has no effect on the direction of Semen Indonesia i.e., Semen Indonesia and Unilever Indonesia go up and down completely randomly.

Pair Corralation between Semen Indonesia and Unilever Indonesia

Assuming the 90 days trading horizon Semen Indonesia Persero is expected to generate 0.91 times more return on investment than Unilever Indonesia. However, Semen Indonesia Persero is 1.1 times less risky than Unilever Indonesia. It trades about -0.1 of its potential returns per unit of risk. Unilever Indonesia Tbk is currently generating about -0.12 per unit of risk. If you would invest  409,000  in Semen Indonesia Persero on September 2, 2024 and sell it today you would lose (59,000) from holding Semen Indonesia Persero or give up 14.43% of portfolio value over 90 days.

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

Semen Indonesia Persero  vs.  Unilever Indonesia Tbk

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 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.

Unilever Indonesia Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Unilever Indonesia Tbk 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.

Pair Trading with Semen Indonesia and Unilever Indonesia

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

The idea behind Semen Indonesia Persero and Unilever Indonesia 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.