Correlation Between Steel Pipe and Emdeki Utama

Can any of the company-specific risk be diversified away by investing in both Steel Pipe and Emdeki Utama 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 Emdeki Utama 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 Emdeki Utama Tbk, you can compare the effects of market volatilities on Steel Pipe and Emdeki Utama 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 Emdeki Utama. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Pipe and Emdeki Utama.

Diversification Opportunities for Steel Pipe and Emdeki Utama

0.68

Correlation Coefficient

Steel Pipe  Emdeki Utama

Poor diversification

The 3 months correlation between Steel and Emdeki is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Steel Pipe Industry and Emdeki Utama Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emdeki Utama Tbk 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 Emdeki Utama. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emdeki Utama Tbk has no effect on the direction of Steel Pipe i.e., Steel Pipe and Emdeki Utama go up and down completely randomly.

Pair Corralation between Steel Pipe and Emdeki Utama

Assuming the 90 days trading horizon Steel Pipe Industry is expected to generate 2.1 times more return on investment than Emdeki Utama. However, Steel Pipe is 2.1 times more volatile than Emdeki Utama Tbk. It trades about 0.0 of its potential returns per unit of risk. Emdeki Utama Tbk is currently generating about -0.17 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.  Emdeki Utama Tbk

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.

Emdeki Utama Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Emdeki Utama Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Steel Pipe and Emdeki Utama

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

The idea behind Steel Pipe Industry and Emdeki Utama 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.