Correlation Between Integra Indocabinet and Erajaya Swasembada

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

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

Diversification Opportunities for Integra Indocabinet and Erajaya Swasembada

-0.5

Correlation Coefficient

Integra Indocabinet  Erajaya Swasembada

Very good diversification

The 3 months correlation between Integra and Erajaya is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Integra Indocabinet Tbk 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 Integra Indocabinet 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 Integra Indocabinet Tbk 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 Integra Indocabinet i.e., Integra Indocabinet and Erajaya Swasembada go up and down completely randomly.

Pair Corralation between Integra Indocabinet and Erajaya Swasembada

Assuming the 90 days trading horizon Integra Indocabinet Tbk is expected to under-perform the Erajaya Swasembada. In addition to that, Integra Indocabinet is 2.1 times more volatile than Erajaya Swasembada Tbk. It trades about -0.15 of its total potential returns per unit of risk. Erajaya Swasembada Tbk is currently generating about -0.08 per unit of volatility. If you would invest  42,200  in Erajaya Swasembada Tbk on September 26, 2024 and sell it today you would lose (1,400) from holding Erajaya Swasembada Tbk or give up 3.32% of portfolio value over 90 days.

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

Integra Indocabinet Tbk  vs.  Erajaya Swasembada Tbk

Integra Indocabinet Tbk

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Integra Indocabinet Tbk are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Integra Indocabinet disclosed solid returns over the last few months and may actually be approaching a breakup point.

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 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 Integra Indocabinet and Erajaya Swasembada

The main advantage of trading using opposite Integra Indocabinet and Erajaya Swasembada positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Integra Indocabinet 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 Integra Indocabinet Tbk 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.