Correlation Between Jakarta Setiabudi and Putra Rajawali

Can any of the company-specific risk be diversified away by investing in both Jakarta Setiabudi and Putra Rajawali 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 Jakarta Setiabudi and Putra Rajawali into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jakarta Setiabudi Internasional and Putra Rajawali Kencana, you can compare the effects of market volatilities on Jakarta Setiabudi and Putra Rajawali 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 Jakarta Setiabudi with a short position of Putra Rajawali. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jakarta Setiabudi and Putra Rajawali.

Diversification Opportunities for Jakarta Setiabudi and Putra Rajawali

0.27

Correlation Coefficient

Jakarta Setiabudi  Putra Rajawali

Modest diversification

The 3 months correlation between Jakarta and Putra is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Jakarta Setiabudi Internasiona and Putra Rajawali Kencana in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putra Rajawali Kencana and Jakarta Setiabudi 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 Jakarta Setiabudi Internasional are associated (or correlated) with Putra Rajawali. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putra Rajawali Kencana has no effect on the direction of Jakarta Setiabudi i.e., Jakarta Setiabudi and Putra Rajawali go up and down completely randomly.

Pair Corralation between Jakarta Setiabudi and Putra Rajawali

Assuming the 90 days trading horizon Jakarta Setiabudi Internasional is expected to generate 2.02 times more return on investment than Putra Rajawali. However, Jakarta Setiabudi is 2.02 times more volatile than Putra Rajawali Kencana. It trades about 0.01 of its potential returns per unit of risk. Putra Rajawali Kencana is currently generating about -0.03 per unit of risk. If you would invest  972,500  in Jakarta Setiabudi Internasional on December 28, 2024 and sell it today you would lose (265,000) from holding Jakarta Setiabudi Internasional or give up 27.25% of portfolio value over 90 days.

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

Jakarta Setiabudi Internasiona  vs.  Putra Rajawali Kencana

Jakarta Setiabudi

Risk-Adjusted Performance

Very Weak

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

Putra Rajawali Kencana

Risk-Adjusted Performance

Very Weak

Over the last 90 days Putra Rajawali Kencana 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 Jakarta Setiabudi and Putra Rajawali

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

The idea behind Jakarta Setiabudi Internasional and Putra Rajawali Kencana 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.