Correlation Between Link Net and PT Sarana
Can any of the company-specific risk be diversified away by investing in both Link Net and PT Sarana 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 Link Net and PT Sarana into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Link Net Tbk and PT Sarana Menara, you can compare the effects of market volatilities on Link Net and PT Sarana 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 Link Net with a short position of PT Sarana. Check out your portfolio center. Please also check ongoing floating volatility patterns of Link Net and PT Sarana.
Diversification Opportunities for Link Net and PT Sarana
Poor diversification
The 3 months correlation between Link and TOWR is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Link Net Tbk and PT Sarana Menara in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Sarana Menara and Link Net 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 Link Net Tbk are associated (or correlated) with PT Sarana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Sarana Menara has no effect on the direction of Link Net i.e., Link Net and PT Sarana go up and down completely randomly.
Pair Corralation between Link Net and PT Sarana
Assuming the 90 days trading horizon Link Net Tbk is expected to generate 2.66 times more return on investment than PT Sarana. However, Link Net is 2.66 times more volatile than PT Sarana Menara. It trades about -0.13 of its potential returns per unit of risk. PT Sarana Menara is currently generating about -0.35 per unit of risk. If you would invest 130,000 in Link Net Tbk on August 28, 2024 and sell it today you would lose (12,500) from holding Link Net Tbk or give up 9.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Link Net Tbk vs. PT Sarana Menara
Performance |
| Timeline |
| Link Net Tbk |
| PT Sarana Menara |
Link Net and PT Sarana Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Link Net and PT Sarana
The main advantage of trading using opposite Link Net and PT Sarana positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Link Net position performs unexpectedly, PT Sarana 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 PT Sarana will offset losses from the drop in PT Sarana's long position.The idea behind Link Net Tbk and PT Sarana Menara 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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