Correlation Between Sumber Energi and Kawasan Industri

Can any of the company-specific risk be diversified away by investing in both Sumber Energi and Kawasan Industri 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 Sumber Energi and Kawasan Industri into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sumber Energi Andalan and Kawasan Industri Jababeka, you can compare the effects of market volatilities on Sumber Energi and Kawasan Industri 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 Sumber Energi with a short position of Kawasan Industri. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumber Energi and Kawasan Industri.

Diversification Opportunities for Sumber Energi and Kawasan Industri

-0.01

Correlation Coefficient

Sumber Energi  Kawasan Industri

Good diversification

The 3 months correlation between Sumber and Kawasan is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Sumber Energi Andalan and Kawasan Industri Jababeka in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kawasan Industri Jababeka and Sumber Energi 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 Sumber Energi Andalan are associated (or correlated) with Kawasan Industri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kawasan Industri Jababeka has no effect on the direction of Sumber Energi i.e., Sumber Energi and Kawasan Industri go up and down completely randomly.

Pair Corralation between Sumber Energi and Kawasan Industri

Assuming the 90 days trading horizon Sumber Energi Andalan is expected to generate 2.89 times more return on investment than Kawasan Industri. However, Sumber Energi is 2.89 times more volatile than Kawasan Industri Jababeka. It trades about 0.09 of its potential returns per unit of risk. Kawasan Industri Jababeka is currently generating about 0.02 per unit of risk. If you would invest  77,000  in Sumber Energi Andalan on February 5, 2024 and sell it today you would earn a total of  8,000  from holding Sumber Energi Andalan or generate 10.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.06%
Values	Daily Returns

Sumber Energi Andalan  vs.  Kawasan Industri Jababeka

Sumber Energi Andalan

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sumber Energi Andalan are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Sumber Energi disclosed solid returns over the last few months and may actually be approaching a breakup point.

Kawasan Industri Jababeka

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kawasan Industri Jababeka has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Kawasan Industri 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 Sumber Energi and Kawasan Industri

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

The idea behind Sumber Energi Andalan and Kawasan Industri Jababeka 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.