Correlation Between Arkadia Digital and Krakatau Steel

Can any of the company-specific risk be diversified away by investing in both Arkadia Digital and Krakatau Steel 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 Arkadia Digital and Krakatau Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Arkadia Digital Media and Krakatau Steel Persero, you can compare the effects of market volatilities on Arkadia Digital and Krakatau Steel 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 Arkadia Digital with a short position of Krakatau Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arkadia Digital and Krakatau Steel.

Diversification Opportunities for Arkadia Digital and Krakatau Steel

0.04

Correlation Coefficient

Arkadia Digital  Krakatau Steel

Significant diversification

The 3 months correlation between Arkadia and Krakatau is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Arkadia Digital Media and Krakatau Steel Persero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Krakatau Steel Persero and Arkadia Digital 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 Arkadia Digital Media are associated (or correlated) with Krakatau Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Krakatau Steel Persero has no effect on the direction of Arkadia Digital i.e., Arkadia Digital and Krakatau Steel go up and down completely randomly.

Pair Corralation between Arkadia Digital and Krakatau Steel

Assuming the 90 days trading horizon Arkadia Digital Media is expected to under-perform the Krakatau Steel. But the stock apears to be less risky and, when comparing its historical volatility, Arkadia Digital Media is 1.26 times less risky than Krakatau Steel. The stock trades about -0.01 of its potential returns per unit of risk. The Krakatau Steel Persero is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  12,600  in Krakatau Steel Persero on September 14, 2024 and sell it today you would lose (600.00) from holding Krakatau Steel Persero or give up 4.76% of portfolio value over 90 days.

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

Arkadia Digital Media  vs.  Krakatau Steel Persero

Arkadia Digital Media

Risk-Adjusted Performance

0 of 100

Very Weak

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

Krakatau Steel Persero

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Krakatau Steel Persero has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Krakatau Steel 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 Arkadia Digital and Krakatau Steel

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

The idea behind Arkadia Digital Media and Krakatau Steel 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.