Correlation Between Bali Towerindo and Kencana Energi

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

By analyzing existing cross correlation between Bali Towerindo Sentra and Kencana Energi Lestari, you can compare the effects of market volatilities on Bali Towerindo and Kencana Energi 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 Bali Towerindo with a short position of Kencana Energi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bali Towerindo and Kencana Energi.

Diversification Opportunities for Bali Towerindo and Kencana Energi

-0.75

Correlation Coefficient

Bali Towerindo  Kencana Energi

Pay attention - limited upside

The 3 months correlation between Bali and Kencana is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Bali Towerindo Sentra and Kencana Energi Lestari in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kencana Energi Lestari and Bali Towerindo 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 Bali Towerindo Sentra are associated (or correlated) with Kencana Energi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kencana Energi Lestari has no effect on the direction of Bali Towerindo i.e., Bali Towerindo and Kencana Energi go up and down completely randomly.

Pair Corralation between Bali Towerindo and Kencana Energi

Assuming the 90 days trading horizon Bali Towerindo Sentra is expected to generate 1.54 times more return on investment than Kencana Energi. However, Bali Towerindo is 1.54 times more volatile than Kencana Energi Lestari. It trades about 0.13 of its potential returns per unit of risk. Kencana Energi Lestari is currently generating about 0.13 per unit of risk. If you would invest  150,000  in Bali Towerindo Sentra on October 26, 2024 and sell it today you would earn a total of  16,000  from holding Bali Towerindo Sentra or generate 10.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	94.74%
Values	Daily Returns

Bali Towerindo Sentra  vs.  Kencana Energi Lestari

Bali Towerindo Sentra

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bali Towerindo Sentra are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Bali Towerindo disclosed solid returns over the last few months and may actually be approaching a breakup point.

Kencana Energi Lestari

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kencana Energi Lestari has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Kencana Energi is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Bali Towerindo and Kencana Energi

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

The idea behind Bali Towerindo Sentra and Kencana Energi Lestari 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.