Correlation Between Capital Financial and Semen Indonesia

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

Diversification Opportunities for Capital Financial and Semen Indonesia

-0.81

Correlation Coefficient

Capital Financial  Semen Indonesia

Pay attention - limited upside

The 3 months correlation between Capital and Semen is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Capital Financial Indonesia and Semen Indonesia Persero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Semen Indonesia Persero 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 Semen Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Semen Indonesia Persero has no effect on the direction of Capital Financial i.e., Capital Financial and Semen Indonesia go up and down completely randomly.

Pair Corralation between Capital Financial and Semen Indonesia

Assuming the 90 days trading horizon Capital Financial Indonesia is expected to generate 0.66 times more return on investment than Semen Indonesia. However, Capital Financial Indonesia is 1.51 times less risky than Semen Indonesia. It trades about 0.22 of its potential returns per unit of risk. Semen Indonesia Persero is currently generating about -0.08 per unit of risk. If you would invest  56,500  in Capital Financial Indonesia on December 30, 2024 and sell it today you would earn a total of  19,500  from holding Capital Financial Indonesia or generate 34.51% return on investment over 90 days.

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

Capital Financial Indonesia  vs.  Semen Indonesia Persero

Capital Financial

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Financial Indonesia are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Capital Financial disclosed solid returns over the last few months and may actually be approaching a breakup point.

Semen Indonesia Persero

Risk-Adjusted Performance

Very Weak

Over the last 90 days Semen Indonesia Persero has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Capital Financial and Semen Indonesia

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

The idea behind Capital Financial Indonesia and Semen Indonesia Persero 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.