Correlation Between Saratoga Investama and Erajaya Swasembada

Can any of the company-specific risk be diversified away by investing in both Saratoga Investama and Erajaya Swasembada 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 Saratoga Investama and Erajaya Swasembada into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Saratoga Investama Sedaya and Erajaya Swasembada Tbk, you can compare the effects of market volatilities on Saratoga Investama and Erajaya Swasembada 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 Saratoga Investama with a short position of Erajaya Swasembada. Check out your portfolio center. Please also check ongoing floating volatility patterns of Saratoga Investama and Erajaya Swasembada.

Diversification Opportunities for Saratoga Investama and Erajaya Swasembada

0.44

Correlation Coefficient

Saratoga Investama  Erajaya Swasembada

Very weak diversification

The 3 months correlation between Saratoga and Erajaya is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Saratoga Investama Sedaya and Erajaya Swasembada Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erajaya Swasembada Tbk and Saratoga Investama 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 Saratoga Investama Sedaya are associated (or correlated) with Erajaya Swasembada. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erajaya Swasembada Tbk has no effect on the direction of Saratoga Investama i.e., Saratoga Investama and Erajaya Swasembada go up and down completely randomly.

Pair Corralation between Saratoga Investama and Erajaya Swasembada

Assuming the 90 days trading horizon Saratoga Investama Sedaya is expected to generate 1.88 times more return on investment than Erajaya Swasembada. However, Saratoga Investama is 1.88 times more volatile than Erajaya Swasembada Tbk. It trades about 0.03 of its potential returns per unit of risk. Erajaya Swasembada Tbk is currently generating about -0.03 per unit of risk. If you would invest  234,000  in Saratoga Investama Sedaya on September 4, 2024 and sell it today you would earn a total of  5,000  from holding Saratoga Investama Sedaya or generate 2.14% return on investment over 90 days.

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

Saratoga Investama Sedaya  vs.  Erajaya Swasembada Tbk

Saratoga Investama Sedaya

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Saratoga Investama Sedaya are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Saratoga Investama may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Erajaya Swasembada Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Erajaya Swasembada Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Erajaya Swasembada 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 Saratoga Investama and Erajaya Swasembada

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

The idea behind Saratoga Investama Sedaya and Erajaya Swasembada 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.