Correlation Between Sawit Sumbermas and Unilever Indonesia

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

By analyzing existing cross correlation between Sawit Sumbermas Sarana and Unilever Indonesia Tbk, you can compare the effects of market volatilities on Sawit Sumbermas 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 Sawit Sumbermas with a short position of Unilever Indonesia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sawit Sumbermas and Unilever Indonesia.

Diversification Opportunities for Sawit Sumbermas and Unilever Indonesia

0.35

Correlation Coefficient

Sawit Sumbermas  Unilever Indonesia

Weak diversification

The 3 months correlation between Sawit and Unilever is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Sawit Sumbermas Sarana 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 Sawit Sumbermas 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 Sawit Sumbermas Sarana 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 Sawit Sumbermas i.e., Sawit Sumbermas and Unilever Indonesia go up and down completely randomly.

Pair Corralation between Sawit Sumbermas and Unilever Indonesia

Assuming the 90 days trading horizon Sawit Sumbermas Sarana is expected to generate 1.66 times more return on investment than Unilever Indonesia. However, Sawit Sumbermas is 1.66 times more volatile than Unilever Indonesia Tbk. It trades about 0.0 of its potential returns per unit of risk. Unilever Indonesia Tbk is currently generating about -0.08 per unit of risk. If you would invest  113,000  in Sawit Sumbermas Sarana on September 20, 2024 and sell it today you would lose (7,500) from holding Sawit Sumbermas Sarana or give up 6.64% of portfolio value over 90 days.

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

Sawit Sumbermas Sarana  vs.  Unilever Indonesia Tbk

Sawit Sumbermas Sarana

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sawit Sumbermas Sarana has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Sawit Sumbermas is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the 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 Sawit Sumbermas and Unilever Indonesia

The main advantage of trading using opposite Sawit Sumbermas and Unilever Indonesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sawit Sumbermas 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 Sawit Sumbermas Sarana 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 CEOs Directory module to screen CEOs from public companies around the world.