Correlation Between Steel Pipe and Chandra Asri

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

Diversification Opportunities for Steel Pipe and Chandra Asri

0.05

Correlation Coefficient

Steel Pipe  Chandra Asri

Significant diversification

The 3 months correlation between Steel and Chandra is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Steel Pipe Industry and Chandra Asri Petrochemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chandra Asri Petroch 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 Chandra Asri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chandra Asri Petroch has no effect on the direction of Steel Pipe i.e., Steel Pipe and Chandra Asri go up and down completely randomly.

Pair Corralation between Steel Pipe and Chandra Asri

Assuming the 90 days trading horizon Steel Pipe Industry is expected to under-perform the Chandra Asri. But the stock apears to be less risky and, when comparing its historical volatility, Steel Pipe Industry is 3.7 times less risky than Chandra Asri. The stock trades about -0.13 of its potential returns per unit of risk. The Chandra Asri Petrochemical is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  700,000  in Chandra Asri Petrochemical on November 28, 2024 and sell it today you would earn a total of  90,000  from holding Chandra Asri Petrochemical or generate 12.86% return on investment over 90 days.

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

Steel Pipe Industry  vs.  Chandra Asri Petrochemical

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 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.

Chandra Asri Petroch

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chandra Asri Petrochemical are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Chandra Asri disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Steel Pipe and Chandra Asri

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

The idea behind Steel Pipe Industry and Chandra Asri Petrochemical 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.