Correlation Between United Tractors and Semen Indonesia

Can any of the company-specific risk be diversified away by investing in both United Tractors and Semen 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 United Tractors and Semen Indonesia 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 Semen Indonesia Persero, you can compare the effects of market volatilities on United Tractors and Semen 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 United Tractors with a short position of Semen Indonesia. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Tractors and Semen Indonesia.

Diversification Opportunities for United Tractors and Semen Indonesia

-0.15

Correlation Coefficient

United Tractors  Semen Indonesia

Good diversification

The 3 months correlation between United and Semen is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding United Tractors Tbk and Semen Indonesia Persero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Semen Indonesia Persero 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 Semen Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Semen Indonesia Persero has no effect on the direction of United Tractors i.e., United Tractors and Semen Indonesia go up and down completely randomly.

Pair Corralation between United Tractors and Semen Indonesia

Assuming the 90 days trading horizon United Tractors Tbk is expected to generate 0.65 times more return on investment than Semen Indonesia. However, United Tractors Tbk is 1.55 times less risky than Semen Indonesia. It trades about -0.01 of its potential returns per unit of risk. Semen Indonesia Persero is currently generating about -0.09 per unit of risk. If you would invest  2,709,076  in United Tractors Tbk on September 3, 2024 and sell it today you would lose (31,576) from holding United Tractors Tbk or give up 1.17% of portfolio value over 90 days.

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

United Tractors Tbk  vs.  Semen Indonesia Persero

United Tractors Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

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

Semen Indonesia Persero

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Semen Indonesia Persero has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with United Tractors and Semen Indonesia

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

The idea behind United Tractors Tbk and Semen Indonesia Persero 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.