Correlation Between KRAKATAU STEEL and DOCDATA

Can any of the company-specific risk be diversified away by investing in both KRAKATAU STEEL and DOCDATA 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 DOCDATA 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 DOCDATA, you can compare the effects of market volatilities on KRAKATAU STEEL and DOCDATA 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 DOCDATA. Check out your portfolio center. Please also check ongoing floating volatility patterns of KRAKATAU STEEL and DOCDATA.

Diversification Opportunities for KRAKATAU STEEL and DOCDATA

-0.43

Correlation Coefficient

KRAKATAU STEEL  DOCDATA

Very good diversification

The 3 months correlation between KRAKATAU and DOCDATA is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding KRAKATAU STEEL B and DOCDATA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DOCDATA 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 DOCDATA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DOCDATA has no effect on the direction of KRAKATAU STEEL i.e., KRAKATAU STEEL and DOCDATA go up and down completely randomly.

Pair Corralation between KRAKATAU STEEL and DOCDATA

Assuming the 90 days trading horizon KRAKATAU STEEL B is expected to generate 3.52 times more return on investment than DOCDATA. However, KRAKATAU STEEL is 3.52 times more volatile than DOCDATA. It trades about 0.24 of its potential returns per unit of risk. DOCDATA is currently generating about -0.04 per unit of risk. If you would invest  0.60  in KRAKATAU STEEL B on October 13, 2024 and sell it today you would earn a total of  0.25  from holding KRAKATAU STEEL B or generate 41.67% return on investment over 90 days.

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

KRAKATAU STEEL B   vs.  DOCDATA

KRAKATAU STEEL B

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KRAKATAU STEEL B are ranked lower than 10 (%) 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.

DOCDATA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DOCDATA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with KRAKATAU STEEL and DOCDATA

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

The idea behind KRAKATAU STEEL B and DOCDATA 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.