Correlation Between Sepatu Bata and Eratex Djaja
Can any of the company-specific risk be diversified away by investing in both Sepatu Bata and Eratex Djaja 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 Sepatu Bata and Eratex Djaja into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sepatu Bata Tbk and Eratex Djaja Tbk, you can compare the effects of market volatilities on Sepatu Bata and Eratex Djaja 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 Sepatu Bata with a short position of Eratex Djaja. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sepatu Bata and Eratex Djaja.
Diversification Opportunities for Sepatu Bata and Eratex Djaja
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sepatu and Eratex is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Sepatu Bata Tbk and Eratex Djaja Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eratex Djaja Tbk and Sepatu Bata 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 Sepatu Bata Tbk are associated (or correlated) with Eratex Djaja. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eratex Djaja Tbk has no effect on the direction of Sepatu Bata i.e., Sepatu Bata and Eratex Djaja go up and down completely randomly.
Pair Corralation between Sepatu Bata and Eratex Djaja
Assuming the 90 days trading horizon Sepatu Bata Tbk is expected to under-perform the Eratex Djaja. But the stock apears to be less risky and, when comparing its historical volatility, Sepatu Bata Tbk is 4.33 times less risky than Eratex Djaja. The stock trades about -0.3 of its potential returns per unit of risk. The Eratex Djaja Tbk is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 9,200 in Eratex Djaja Tbk on August 29, 2024 and sell it today you would earn a total of 1,600 from holding Eratex Djaja Tbk or generate 17.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Sepatu Bata Tbk vs. Eratex Djaja Tbk
Performance |
| Timeline |
| Sepatu Bata Tbk |
| Eratex Djaja Tbk |
Sepatu Bata and Eratex Djaja Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sepatu Bata and Eratex Djaja
The main advantage of trading using opposite Sepatu Bata and Eratex Djaja positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sepatu Bata position performs unexpectedly, Eratex Djaja 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 Eratex Djaja will offset losses from the drop in Eratex Djaja's long position.| Sepatu Bata vs. Indo Kordsa Tbk | Sepatu Bata vs. Goodyear Indonesia Tbk | Sepatu Bata vs. Argo Pantes Tbk | Sepatu Bata vs. Primarindo Asia Infrastructure |
| Eratex Djaja vs. Ever Shine Textile | Eratex Djaja vs. PT Century Textile | Eratex Djaja vs. Argo Pantes Tbk | Eratex Djaja vs. Primarindo Asia Infrastructure |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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