Correlation Between Citra Marga and Kawasan Industri

Can any of the company-specific risk be diversified away by investing in both Citra Marga and Kawasan Industri 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 Citra Marga and Kawasan Industri into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Citra Marga Nusaphala and Kawasan Industri Jababeka, you can compare the effects of market volatilities on Citra Marga and Kawasan Industri 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 Citra Marga with a short position of Kawasan Industri. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citra Marga and Kawasan Industri.

Diversification Opportunities for Citra Marga and Kawasan Industri

-0.53

Correlation Coefficient

Citra Marga  Kawasan Industri

Excellent diversification

The 3 months correlation between Citra and Kawasan is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Citra Marga Nusaphala and Kawasan Industri Jababeka in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kawasan Industri Jababeka and Citra Marga 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 Citra Marga Nusaphala are associated (or correlated) with Kawasan Industri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kawasan Industri Jababeka has no effect on the direction of Citra Marga i.e., Citra Marga and Kawasan Industri go up and down completely randomly.

Pair Corralation between Citra Marga and Kawasan Industri

Assuming the 90 days trading horizon Citra Marga Nusaphala is expected to under-perform the Kawasan Industri. But the stock apears to be less risky and, when comparing its historical volatility, Citra Marga Nusaphala is 1.19 times less risky than Kawasan Industri. The stock trades about -0.02 of its potential returns per unit of risk. The Kawasan Industri Jababeka is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  14,600  in Kawasan Industri Jababeka on September 3, 2024 and sell it today you would earn a total of  5,000  from holding Kawasan Industri Jababeka or generate 34.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Citra Marga Nusaphala  vs.  Kawasan Industri Jababeka

Citra Marga Nusaphala

Risk-Adjusted Performance

0 of 100

Very Weak

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

Kawasan Industri Jababeka

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kawasan Industri Jababeka are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Kawasan Industri disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citra Marga and Kawasan Industri

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

The idea behind Citra Marga Nusaphala and Kawasan Industri Jababeka 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 Transaction History module to view history of all your transactions and understand their impact on performance.