Correlation Between Tempo Inti and Sarana Meditama

Can any of the company-specific risk be diversified away by investing in both Tempo Inti and Sarana Meditama 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 Tempo Inti and Sarana Meditama into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tempo Inti Media and Sarana Meditama Metropolitan, you can compare the effects of market volatilities on Tempo Inti and Sarana Meditama 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 Tempo Inti with a short position of Sarana Meditama. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tempo Inti and Sarana Meditama.

Diversification Opportunities for Tempo Inti and Sarana Meditama

0.77

Correlation Coefficient

Tempo Inti  Sarana Meditama

Poor diversification

The 3 months correlation between Tempo and Sarana is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Tempo Inti Media and Sarana Meditama Metropolitan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sarana Meditama Metr and Tempo Inti 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 Tempo Inti Media are associated (or correlated) with Sarana Meditama. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sarana Meditama Metr has no effect on the direction of Tempo Inti i.e., Tempo Inti and Sarana Meditama go up and down completely randomly.

Pair Corralation between Tempo Inti and Sarana Meditama

Assuming the 90 days trading horizon Tempo Inti Media is expected to generate 2.33 times more return on investment than Sarana Meditama. However, Tempo Inti is 2.33 times more volatile than Sarana Meditama Metropolitan. It trades about 0.04 of its potential returns per unit of risk. Sarana Meditama Metropolitan is currently generating about 0.06 per unit of risk. If you would invest  18,300  in Tempo Inti Media on September 17, 2024 and sell it today you would earn a total of  100.00  from holding Tempo Inti Media or generate 0.55% return on investment over 90 days.

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

Tempo Inti Media  vs.  Sarana Meditama Metropolitan

Tempo Inti Media

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tempo Inti Media are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Tempo Inti disclosed solid returns over the last few months and may actually be approaching a breakup point.

Sarana Meditama Metr

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sarana Meditama Metropolitan are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Sarana Meditama may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Tempo Inti and Sarana Meditama

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

The idea behind Tempo Inti Media and Sarana Meditama Metropolitan 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.