Correlation Between Sawit Sumbermas and Provident Agro
Can any of the company-specific risk be diversified away by investing in both Sawit Sumbermas and Provident Agro 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 Sawit Sumbermas and Provident Agro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sawit Sumbermas Sarana and Provident Agro Tbk, you can compare the effects of market volatilities on Sawit Sumbermas and Provident Agro 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 Sawit Sumbermas with a short position of Provident Agro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sawit Sumbermas and Provident Agro.
Diversification Opportunities for Sawit Sumbermas and Provident Agro
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sawit and Provident is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Sawit Sumbermas Sarana and Provident Agro Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Provident Agro Tbk and Sawit Sumbermas 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 Sawit Sumbermas Sarana are associated (or correlated) with Provident Agro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Provident Agro Tbk has no effect on the direction of Sawit Sumbermas i.e., Sawit Sumbermas and Provident Agro go up and down completely randomly.
Pair Corralation between Sawit Sumbermas and Provident Agro
Assuming the 90 days trading horizon Sawit Sumbermas Sarana is expected to under-perform the Provident Agro. But the stock apears to be less risky and, when comparing its historical volatility, Sawit Sumbermas Sarana is 1.08 times less risky than Provident Agro. The stock trades about -0.02 of its potential returns per unit of risk. The Provident Agro Tbk is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 58,500 in Provident Agro Tbk on August 24, 2024 and sell it today you would lose (18,700) from holding Provident Agro Tbk or give up 31.97% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sawit Sumbermas Sarana vs. Provident Agro Tbk
Performance |
| Timeline |
| Sawit Sumbermas Sarana |
| Provident Agro Tbk |
Sawit Sumbermas and Provident Agro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sawit Sumbermas and Provident Agro
The main advantage of trading using opposite Sawit Sumbermas and Provident Agro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sawit Sumbermas position performs unexpectedly, Provident Agro 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 Provident Agro will offset losses from the drop in Provident Agro's long position.| Sawit Sumbermas vs. Charoen Pokphand Indonesia | Sawit Sumbermas vs. Kalbe Farma Tbk | Sawit Sumbermas vs. Indofood Cbp Sukses | Sawit Sumbermas vs. PT Indofood Sukses |
| Provident Agro vs. Charoen Pokphand Indonesia | Provident Agro vs. Kalbe Farma Tbk | Provident Agro vs. Indofood Cbp Sukses | Provident Agro vs. PT Indofood Sukses |
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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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