Correlation Between PT Indonesia and Kencana Energi

Can any of the company-specific risk be diversified away by investing in both PT Indonesia and Kencana Energi 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 PT Indonesia and Kencana Energi into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PT Indonesia Kendaraan and Kencana Energi Lestari, you can compare the effects of market volatilities on PT Indonesia and Kencana Energi 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 PT Indonesia with a short position of Kencana Energi. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Indonesia and Kencana Energi.

Diversification Opportunities for PT Indonesia and Kencana Energi

0.6

Correlation Coefficient

PT Indonesia  Kencana Energi

Poor diversification

The 3 months correlation between IPCC and Kencana is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding PT Indonesia Kendaraan and Kencana Energi Lestari in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kencana Energi Lestari and PT Indonesia 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 PT Indonesia Kendaraan are associated (or correlated) with Kencana Energi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kencana Energi Lestari has no effect on the direction of PT Indonesia i.e., PT Indonesia and Kencana Energi go up and down completely randomly.

Pair Corralation between PT Indonesia and Kencana Energi

Assuming the 90 days trading horizon PT Indonesia is expected to generate 1.83 times less return on investment than Kencana Energi. But when comparing it to its historical volatility, PT Indonesia Kendaraan is 1.82 times less risky than Kencana Energi. It trades about 0.11 of its potential returns per unit of risk. Kencana Energi Lestari is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  59,000  in Kencana Energi Lestari on December 30, 2024 and sell it today you would earn a total of  10,500  from holding Kencana Energi Lestari or generate 17.8% return on investment over 90 days.

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

PT Indonesia Kendaraan  vs.  Kencana Energi Lestari

PT Indonesia Kendaraan

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PT Indonesia Kendaraan are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, PT Indonesia may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Kencana Energi Lestari

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kencana Energi Lestari are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Kencana Energi disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Indonesia and Kencana Energi

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

The idea behind PT Indonesia Kendaraan and Kencana Energi Lestari 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.