Correlation Between KRAKATAU STEEL and Computershare

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

Diversification Opportunities for KRAKATAU STEEL and Computershare

0.45

Correlation Coefficient

KRAKATAU STEEL  Computershare

Very weak diversification

The 3 months correlation between KRAKATAU and Computershare is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding KRAKATAU STEEL B and Computershare Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Computershare Limited 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 Computershare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Computershare Limited has no effect on the direction of KRAKATAU STEEL i.e., KRAKATAU STEEL and Computershare go up and down completely randomly.

Pair Corralation between KRAKATAU STEEL and Computershare

Assuming the 90 days trading horizon KRAKATAU STEEL B is expected to generate 4.39 times more return on investment than Computershare. However, KRAKATAU STEEL is 4.39 times more volatile than Computershare Limited. It trades about 0.04 of its potential returns per unit of risk. Computershare Limited is currently generating about 0.05 per unit of risk. If you would invest  2.65  in KRAKATAU STEEL B on September 29, 2024 and sell it today you would lose (1.80) from holding KRAKATAU STEEL B or give up 67.92% of portfolio value over 90 days.

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

KRAKATAU STEEL B   vs.  Computershare Limited

KRAKATAU STEEL B

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KRAKATAU STEEL B are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward-looking signals, KRAKATAU STEEL unveiled solid returns over the last few months and may actually be approaching a breakup point.

Computershare Limited

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Computershare Limited are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Computershare reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KRAKATAU STEEL and Computershare

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

The idea behind KRAKATAU STEEL B and Computershare Limited 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 Commodity Directory module to find actively traded commodities issued by global exchanges.