Correlation Between Provident Agro and Salim Ivomas
Can any of the company-specific risk be diversified away by investing in both Provident Agro and Salim Ivomas 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 Provident Agro and Salim Ivomas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Provident Agro Tbk and Salim Ivomas Pratama, you can compare the effects of market volatilities on Provident Agro and Salim Ivomas 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 Provident Agro with a short position of Salim Ivomas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Provident Agro and Salim Ivomas.
Diversification Opportunities for Provident Agro and Salim Ivomas
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Provident and Salim is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Provident Agro Tbk and Salim Ivomas Pratama in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salim Ivomas Pratama and Provident Agro 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 Provident Agro Tbk are associated (or correlated) with Salim Ivomas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salim Ivomas Pratama has no effect on the direction of Provident Agro i.e., Provident Agro and Salim Ivomas go up and down completely randomly.
Pair Corralation between Provident Agro and Salim Ivomas
Assuming the 90 days trading horizon Provident Agro Tbk is expected to generate 0.79 times more return on investment than Salim Ivomas. However, Provident Agro Tbk is 1.26 times less risky than Salim Ivomas. It trades about -0.09 of its potential returns per unit of risk. Salim Ivomas Pratama is currently generating about -0.24 per unit of risk. If you would invest 40,800 in Provident Agro Tbk on August 28, 2024 and sell it today you would lose (800.00) from holding Provident Agro Tbk or give up 1.96% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Provident Agro Tbk vs. Salim Ivomas Pratama
Performance |
| Timeline |
| Provident Agro Tbk |
| Salim Ivomas Pratama |
Provident Agro and Salim Ivomas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Provident Agro and Salim Ivomas
The main advantage of trading using opposite Provident Agro and Salim Ivomas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Provident Agro position performs unexpectedly, Salim Ivomas 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 Salim Ivomas will offset losses from the drop in Salim Ivomas' long position.The idea behind Provident Agro Tbk and Salim Ivomas Pratama 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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