Correlation Between Jasa Armada and Kencana Energi

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

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

Diversification Opportunities for Jasa Armada and Kencana Energi

-0.04

Correlation Coefficient

Jasa Armada  Kencana Energi

Good diversification

The 3 months correlation between Jasa and Kencana is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Jasa Armada Indonesia 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 Jasa Armada 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 Jasa Armada Indonesia 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 Jasa Armada i.e., Jasa Armada and Kencana Energi go up and down completely randomly.

Pair Corralation between Jasa Armada and Kencana Energi

Assuming the 90 days trading horizon Jasa Armada Indonesia is expected to under-perform the Kencana Energi. But the stock apears to be less risky and, when comparing its historical volatility, Jasa Armada Indonesia is 3.06 times less risky than Kencana Energi. The stock trades about -0.04 of its potential returns per unit of risk. The 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Jasa Armada Indonesia  vs.  Kencana Energi Lestari

Jasa Armada Indonesia

Risk-Adjusted Performance

Very Weak

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

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 Jasa Armada and Kencana Energi

The main advantage of trading using opposite Jasa Armada and Kencana Energi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jasa Armada 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 Jasa Armada Indonesia 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..