Correlation Between KRAKATAU STEEL and YAOKO

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

By analyzing existing cross correlation between KRAKATAU STEEL B and YAOKO LTD, you can compare the effects of market volatilities on KRAKATAU STEEL and YAOKO 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 KRAKATAU STEEL with a short position of YAOKO. Check out your portfolio center. Please also check ongoing floating volatility patterns of KRAKATAU STEEL and YAOKO.

Diversification Opportunities for KRAKATAU STEEL and YAOKO

-0.79

Correlation Coefficient

KRAKATAU STEEL  YAOKO

Pay attention - limited upside

The 3 months correlation between KRAKATAU and YAOKO is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding KRAKATAU STEEL B and YAOKO LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YAOKO LTD and KRAKATAU STEEL 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 KRAKATAU STEEL B are associated (or correlated) with YAOKO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YAOKO LTD has no effect on the direction of KRAKATAU STEEL i.e., KRAKATAU STEEL and YAOKO go up and down completely randomly.

Pair Corralation between KRAKATAU STEEL and YAOKO

If you would invest  0.60  in KRAKATAU STEEL B on September 16, 2024 and sell it today you would earn a total of  0.00  from holding KRAKATAU STEEL B or generate 0.0% return on investment over 90 days.

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

KRAKATAU STEEL B   vs.  YAOKO LTD

KRAKATAU STEEL B

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KRAKATAU STEEL B are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile forward-looking signals, KRAKATAU STEEL unveiled solid returns over the last few months and may actually be approaching a breakup point.

YAOKO LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days YAOKO LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with KRAKATAU STEEL and YAOKO

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

The idea behind KRAKATAU STEEL B and YAOKO LTD 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.