Correlation Between Elang Mahkota and Rukun Raharja

Can any of the company-specific risk be diversified away by investing in both Elang Mahkota and Rukun Raharja 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 Elang Mahkota and Rukun Raharja into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Elang Mahkota Teknologi and Rukun Raharja Tbk, you can compare the effects of market volatilities on Elang Mahkota and Rukun Raharja 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 Elang Mahkota with a short position of Rukun Raharja. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elang Mahkota and Rukun Raharja.

Diversification Opportunities for Elang Mahkota and Rukun Raharja

0.8

Correlation Coefficient

Elang Mahkota  Rukun Raharja

Very poor diversification

The 3 months correlation between Elang and Rukun is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Elang Mahkota Teknologi and Rukun Raharja Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rukun Raharja Tbk and Elang Mahkota 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 Elang Mahkota Teknologi are associated (or correlated) with Rukun Raharja. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rukun Raharja Tbk has no effect on the direction of Elang Mahkota i.e., Elang Mahkota and Rukun Raharja go up and down completely randomly.

Pair Corralation between Elang Mahkota and Rukun Raharja

Assuming the 90 days trading horizon Elang Mahkota is expected to generate 2.34 times less return on investment than Rukun Raharja. But when comparing it to its historical volatility, Elang Mahkota Teknologi is 1.52 times less risky than Rukun Raharja. It trades about 0.18 of its potential returns per unit of risk. Rukun Raharja Tbk is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  120,000  in Rukun Raharja Tbk on September 13, 2024 and sell it today you would earn a total of  166,000  from holding Rukun Raharja Tbk or generate 138.33% return on investment over 90 days.

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

Elang Mahkota Teknologi  vs.  Rukun Raharja Tbk

Elang Mahkota Teknologi

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Elang Mahkota Teknologi are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Elang Mahkota disclosed solid returns over the last few months and may actually be approaching a breakup point.

Rukun Raharja Tbk

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Rukun Raharja Tbk are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Rukun Raharja disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Elang Mahkota and Rukun Raharja

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

The idea behind Elang Mahkota Teknologi and Rukun Raharja Tbk 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.