Correlation Between Tri Banyan and Sawit Sumbermas
Can any of the company-specific risk be diversified away by investing in both Tri Banyan and Sawit Sumbermas 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 Tri Banyan and Sawit Sumbermas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tri Banyan Tirta and Sawit Sumbermas Sarana, you can compare the effects of market volatilities on Tri Banyan and Sawit Sumbermas 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 Tri Banyan with a short position of Sawit Sumbermas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tri Banyan and Sawit Sumbermas.
Diversification Opportunities for Tri Banyan and Sawit Sumbermas
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Tri and Sawit is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Tri Banyan Tirta and Sawit Sumbermas Sarana in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sawit Sumbermas Sarana and Tri Banyan 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 Tri Banyan Tirta are associated (or correlated) with Sawit Sumbermas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sawit Sumbermas Sarana has no effect on the direction of Tri Banyan i.e., Tri Banyan and Sawit Sumbermas go up and down completely randomly.
Pair Corralation between Tri Banyan and Sawit Sumbermas
Assuming the 90 days trading horizon Tri Banyan Tirta is expected to under-perform the Sawit Sumbermas. But the stock apears to be less risky and, when comparing its historical volatility, Tri Banyan Tirta is 1.67 times less risky than Sawit Sumbermas. The stock trades about -0.24 of its potential returns per unit of risk. The Sawit Sumbermas Sarana is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 155,569 in Sawit Sumbermas Sarana on January 24, 2024 and sell it today you would lose (54,569) from holding Sawit Sumbermas Sarana or give up 35.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.63% |
| Values | Daily Returns |
Tri Banyan Tirta vs. Sawit Sumbermas Sarana
Performance |
| Timeline |
| Tri Banyan Tirta |
| Sawit Sumbermas Sarana |
Tri Banyan and Sawit Sumbermas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tri Banyan and Sawit Sumbermas
The main advantage of trading using opposite Tri Banyan and Sawit Sumbermas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tri Banyan position performs unexpectedly, Sawit Sumbermas 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 Sawit Sumbermas will offset losses from the drop in Sawit Sumbermas' long position.The idea behind Tri Banyan Tirta and Sawit Sumbermas Sarana 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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