Correlation Between Capital Financial and Jakarta Int

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

By analyzing existing cross correlation between Capital Financial Indonesia and Jakarta Int Hotels, you can compare the effects of market volatilities on Capital Financial and Jakarta Int 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 Capital Financial with a short position of Jakarta Int. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Financial and Jakarta Int.

Diversification Opportunities for Capital Financial and Jakarta Int

0.42

Correlation Coefficient

Capital Financial  Jakarta Int

Very weak diversification

The 3 months correlation between Capital and Jakarta is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Capital Financial Indonesia and Jakarta Int Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jakarta Int Hotels and Capital Financial 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 Capital Financial Indonesia are associated (or correlated) with Jakarta Int. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jakarta Int Hotels has no effect on the direction of Capital Financial i.e., Capital Financial and Jakarta Int go up and down completely randomly.

Pair Corralation between Capital Financial and Jakarta Int

Assuming the 90 days trading horizon Capital Financial is expected to generate 58.83 times less return on investment than Jakarta Int. But when comparing it to its historical volatility, Capital Financial Indonesia is 3.35 times less risky than Jakarta Int. It trades about 0.02 of its potential returns per unit of risk. Jakarta Int Hotels is currently generating about 0.43 of returns per unit of risk over similar time horizon. If you would invest  33,200  in Jakarta Int Hotels on September 2, 2024 and sell it today you would earn a total of  263,800  from holding Jakarta Int Hotels or generate 794.58% return on investment over 90 days.

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

Capital Financial Indonesia  vs.  Jakarta Int Hotels

Capital Financial

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Financial Indonesia are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Capital Financial is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Jakarta Int Hotels

Risk-Adjusted Performance

33 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Jakarta Int Hotels are ranked lower than 33 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Jakarta Int disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Capital Financial and Jakarta Int

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

The idea behind Capital Financial Indonesia and Jakarta Int Hotels 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..