Correlation Between Sona Topas and Integra Indocabinet

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

Diversification Opportunities for Sona Topas and Integra Indocabinet

0.4

Correlation Coefficient

Sona Topas  Integra Indocabinet

Very weak diversification

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

Pair Corralation between Sona Topas and Integra Indocabinet

Assuming the 90 days trading horizon Sona Topas Tourism is expected to generate 2.29 times more return on investment than Integra Indocabinet. However, Sona Topas is 2.29 times more volatile than Integra Indocabinet Tbk. It trades about 0.05 of its potential returns per unit of risk. Integra Indocabinet Tbk is currently generating about 0.11 per unit of risk. If you would invest  435,000  in Sona Topas Tourism on September 26, 2024 and sell it today you would earn a total of  14,000  from holding Sona Topas Tourism or generate 3.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Sona Topas Tourism  vs.  Integra Indocabinet Tbk

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.

Integra Indocabinet Tbk

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Integra Indocabinet Tbk are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Integra Indocabinet disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sona Topas and Integra Indocabinet

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

The idea behind Sona Topas Tourism and Integra Indocabinet 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.