Correlation Between United Tractors and Cemindo Gemilang

Can any of the company-specific risk be diversified away by investing in both United Tractors and Cemindo Gemilang 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 United Tractors and Cemindo Gemilang into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between United Tractors Tbk and Cemindo Gemilang Tbk, you can compare the effects of market volatilities on United Tractors and Cemindo Gemilang 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 United Tractors with a short position of Cemindo Gemilang. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Tractors and Cemindo Gemilang.

Diversification Opportunities for United Tractors and Cemindo Gemilang

-0.35

Correlation Coefficient

United Tractors  Cemindo Gemilang

Very good diversification

The 3 months correlation between United and Cemindo is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding United Tractors Tbk and Cemindo Gemilang Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cemindo Gemilang Tbk and United Tractors 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 United Tractors Tbk are associated (or correlated) with Cemindo Gemilang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cemindo Gemilang Tbk has no effect on the direction of United Tractors i.e., United Tractors and Cemindo Gemilang go up and down completely randomly.

Pair Corralation between United Tractors and Cemindo Gemilang

Assuming the 90 days trading horizon United Tractors Tbk is expected to generate 0.74 times more return on investment than Cemindo Gemilang. However, United Tractors Tbk is 1.36 times less risky than Cemindo Gemilang. It trades about 0.09 of its potential returns per unit of risk. Cemindo Gemilang Tbk is currently generating about -0.03 per unit of risk. If you would invest  2,601,785  in United Tractors Tbk on September 16, 2024 and sell it today you would earn a total of  200,715  from holding United Tractors Tbk or generate 7.71% return on investment over 90 days.

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

United Tractors Tbk  vs.  Cemindo Gemilang Tbk

United Tractors Tbk

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in United Tractors Tbk are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, United Tractors may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Cemindo Gemilang Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cemindo Gemilang Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Cemindo Gemilang 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 United Tractors and Cemindo Gemilang

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

The idea behind United Tractors Tbk and Cemindo Gemilang 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.