Correlation Between Chandra Asri and Sumber Alfaria

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

By analyzing existing cross correlation between Chandra Asri Petrochemical and Sumber Alfaria Trijaya, you can compare the effects of market volatilities on Chandra Asri and Sumber Alfaria 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 Chandra Asri with a short position of Sumber Alfaria. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chandra Asri and Sumber Alfaria.

Diversification Opportunities for Chandra Asri and Sumber Alfaria

0.52

Correlation Coefficient

Chandra Asri  Sumber Alfaria

Very weak diversification

The 3 months correlation between Chandra and Sumber is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Chandra Asri Petrochemical and Sumber Alfaria Trijaya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumber Alfaria Trijaya and Chandra Asri 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 Chandra Asri Petrochemical are associated (or correlated) with Sumber Alfaria. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumber Alfaria Trijaya has no effect on the direction of Chandra Asri i.e., Chandra Asri and Sumber Alfaria go up and down completely randomly.

Pair Corralation between Chandra Asri and Sumber Alfaria

Assuming the 90 days trading horizon Chandra Asri Petrochemical is expected to generate 2.37 times more return on investment than Sumber Alfaria. However, Chandra Asri is 2.37 times more volatile than Sumber Alfaria Trijaya. It trades about 0.35 of its potential returns per unit of risk. Sumber Alfaria Trijaya is currently generating about 0.02 per unit of risk. If you would invest  464,000  in Chandra Asri Petrochemical on February 18, 2024 and sell it today you would earn a total of  448,500  from holding Chandra Asri Petrochemical or generate 96.66% return on investment over 90 days.

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

Chandra Asri Petrochemical  vs.  Sumber Alfaria Trijaya

Chandra Asri Petroch

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Chandra Asri Petrochemical are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Chandra Asri disclosed solid returns over the last few months and may actually be approaching a breakup point.

Sumber Alfaria Trijaya

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sumber Alfaria Trijaya are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Sumber Alfaria 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 Chandra Asri and Sumber Alfaria

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

The idea behind Chandra Asri Petrochemical and Sumber Alfaria Trijaya 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.