Correlation Between Kedawung Setia and Fortune Mate

Can any of the company-specific risk be diversified away by investing in both Kedawung Setia and Fortune Mate 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 Kedawung Setia and Fortune Mate into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kedawung Setia Industrial and Fortune Mate Indonesia, you can compare the effects of market volatilities on Kedawung Setia and Fortune Mate 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 Kedawung Setia with a short position of Fortune Mate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kedawung Setia and Fortune Mate.

Diversification Opportunities for Kedawung Setia and Fortune Mate

0.6

Correlation Coefficient

Kedawung Setia  Fortune Mate

Poor diversification

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

Pair Corralation between Kedawung Setia and Fortune Mate

Assuming the 90 days trading horizon Kedawung Setia Industrial is expected to generate 0.47 times more return on investment than Fortune Mate. However, Kedawung Setia Industrial is 2.11 times less risky than Fortune Mate. It trades about -0.02 of its potential returns per unit of risk. Fortune Mate Indonesia is currently generating about -0.05 per unit of risk. If you would invest  46,000  in Kedawung Setia Industrial on December 29, 2024 and sell it today you would lose (5,200) from holding Kedawung Setia Industrial or give up 11.3% of portfolio value over 90 days.

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

Kedawung Setia Industrial  vs.  Fortune Mate Indonesia

Kedawung Setia Industrial

Risk-Adjusted Performance

Very Weak

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

Fortune Mate Indonesia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fortune Mate Indonesia 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 April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Kedawung Setia and Fortune Mate

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

The idea behind Kedawung Setia Industrial and Fortune Mate Indonesia 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.