Correlation Between Steel Pipe and Kedaung Indah

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

By analyzing existing cross correlation between Steel Pipe Industry and Kedaung Indah Can, you can compare the effects of market volatilities on Steel Pipe and Kedaung Indah 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 Steel Pipe with a short position of Kedaung Indah. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Pipe and Kedaung Indah.

Diversification Opportunities for Steel Pipe and Kedaung Indah

0.6

Correlation Coefficient

Steel Pipe  Kedaung Indah

Poor diversification

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

Pair Corralation between Steel Pipe and Kedaung Indah

Assuming the 90 days trading horizon Steel Pipe Industry is expected to generate 0.42 times more return on investment than Kedaung Indah. However, Steel Pipe Industry is 2.39 times less risky than Kedaung Indah. It trades about 0.0 of its potential returns per unit of risk. Kedaung Indah Can is currently generating about -0.01 per unit of risk. If you would invest  26,800  in Steel Pipe Industry on December 30, 2024 and sell it today you would lose (600.00) from holding Steel Pipe Industry or give up 2.24% of portfolio value over 90 days.

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

Steel Pipe Industry  vs.  Kedaung Indah Can

Steel Pipe Industry

Risk-Adjusted Performance

Very Weak

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

Kedaung Indah Can

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kedaung Indah Can has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Kedaung Indah 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 Steel Pipe and Kedaung Indah

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

The idea behind Steel Pipe Industry and Kedaung Indah Can 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.