Correlation Between Jasa Marga and Krakatau Steel

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

By analyzing existing cross correlation between Jasa Marga Tbk and Krakatau Steel Persero, you can compare the effects of market volatilities on Jasa Marga and Krakatau Steel 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 Marga with a short position of Krakatau Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jasa Marga and Krakatau Steel.

Diversification Opportunities for Jasa Marga and Krakatau Steel

0.81

Correlation Coefficient

Jasa Marga  Krakatau Steel

Very poor diversification

The 3 months correlation between Jasa and Krakatau is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Jasa Marga Tbk and Krakatau Steel Persero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Krakatau Steel Persero and Jasa Marga 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 Marga Tbk are associated (or correlated) with Krakatau Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Krakatau Steel Persero has no effect on the direction of Jasa Marga i.e., Jasa Marga and Krakatau Steel go up and down completely randomly.

Pair Corralation between Jasa Marga and Krakatau Steel

Assuming the 90 days trading horizon Jasa Marga Tbk is expected to generate 0.84 times more return on investment than Krakatau Steel. However, Jasa Marga Tbk is 1.19 times less risky than Krakatau Steel. It trades about -0.01 of its potential returns per unit of risk. Krakatau Steel Persero is currently generating about -0.16 per unit of risk. If you would invest  445,000  in Jasa Marga Tbk on October 11, 2024 and sell it today you would lose (5,000) from holding Jasa Marga Tbk or give up 1.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	94.74%
Values	Daily Returns

Jasa Marga Tbk  vs.  Krakatau Steel Persero

Jasa Marga Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jasa Marga Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak 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.

Krakatau Steel Persero

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Krakatau Steel Persero has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Jasa Marga and Krakatau Steel

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

The idea behind Jasa Marga Tbk and Krakatau Steel Persero 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.