Correlation Between Sumi Indo and Hanjaya Mandala

Can any of the company-specific risk be diversified away by investing in both Sumi Indo and Hanjaya Mandala 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 Sumi Indo and Hanjaya Mandala into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sumi Indo Kabel and Hanjaya Mandala Sampoerna, you can compare the effects of market volatilities on Sumi Indo and Hanjaya Mandala 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 Sumi Indo with a short position of Hanjaya Mandala. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumi Indo and Hanjaya Mandala.

Diversification Opportunities for Sumi Indo and Hanjaya Mandala

0.06

Correlation Coefficient

Sumi Indo  Hanjaya Mandala

Significant diversification

The 3 months correlation between Sumi and Hanjaya is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Sumi Indo Kabel and Hanjaya Mandala Sampoerna in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanjaya Mandala Sampoerna and Sumi Indo 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 Sumi Indo Kabel are associated (or correlated) with Hanjaya Mandala. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanjaya Mandala Sampoerna has no effect on the direction of Sumi Indo i.e., Sumi Indo and Hanjaya Mandala go up and down completely randomly.

Pair Corralation between Sumi Indo and Hanjaya Mandala

Assuming the 90 days trading horizon Sumi Indo Kabel is expected to under-perform the Hanjaya Mandala. In addition to that, Sumi Indo is 1.5 times more volatile than Hanjaya Mandala Sampoerna. It trades about -0.1 of its total potential returns per unit of risk. Hanjaya Mandala Sampoerna is currently generating about -0.04 per unit of volatility. If you would invest  77,651  in Hanjaya Mandala Sampoerna on February 27, 2024 and sell it today you would lose (651.00) from holding Hanjaya Mandala Sampoerna or give up 0.84% of portfolio value over 90 days.

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

Sumi Indo Kabel  vs.  Hanjaya Mandala Sampoerna

Sumi Indo Kabel

Risk-Adjusted Performance

0 of 100

Very Weak

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

Hanjaya Mandala Sampoerna

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hanjaya Mandala Sampoerna has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Hanjaya Mandala 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 Sumi Indo and Hanjaya Mandala

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

The idea behind Sumi Indo Kabel and Hanjaya Mandala Sampoerna 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.