Correlation Between Sona Topas and Langgeng Makmur

Can any of the company-specific risk be diversified away by investing in both Sona Topas and Langgeng Makmur 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 Sona Topas and Langgeng Makmur into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sona Topas Tourism and Langgeng Makmur Industri, you can compare the effects of market volatilities on Sona Topas and Langgeng Makmur 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 Sona Topas with a short position of Langgeng Makmur. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sona Topas and Langgeng Makmur.

Diversification Opportunities for Sona Topas and Langgeng Makmur

0.15

Correlation Coefficient

Sona Topas  Langgeng Makmur

Average diversification

The 3 months correlation between Sona and Langgeng is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Sona Topas Tourism and Langgeng Makmur Industri in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Langgeng Makmur Industri and Sona Topas 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 Sona Topas Tourism are associated (or correlated) with Langgeng Makmur. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Langgeng Makmur Industri has no effect on the direction of Sona Topas i.e., Sona Topas and Langgeng Makmur go up and down completely randomly.

Pair Corralation between Sona Topas and Langgeng Makmur

Assuming the 90 days trading horizon Sona Topas is expected to generate 2.47 times less return on investment than Langgeng Makmur. In addition to that, Sona Topas is 1.03 times more volatile than Langgeng Makmur Industri. It trades about 0.05 of its total potential returns per unit of risk. Langgeng Makmur Industri is currently generating about 0.14 per unit of volatility. If you would invest  7,800  in Langgeng Makmur Industri on September 27, 2024 and sell it today you would earn a total of  6,200  from holding Langgeng Makmur Industri or generate 79.49% return on investment over 90 days.

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

Sona Topas Tourism  vs.  Langgeng Makmur Industri

Sona Topas Tourism

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sona Topas Tourism are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Sona Topas disclosed solid returns over the last few months and may actually be approaching a breakup point.

Langgeng Makmur Industri

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Langgeng Makmur Industri are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Langgeng Makmur disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sona Topas and Langgeng Makmur

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

The idea behind Sona Topas Tourism and Langgeng Makmur Industri 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.