Correlation Between Kedawung Setia and Metrodata Electronics

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

Diversification Opportunities for Kedawung Setia and Metrodata Electronics

0.3

Correlation Coefficient

Kedawung Setia  Metrodata Electronics

Weak diversification

The 3 months correlation between Kedawung and Metrodata is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Kedawung Setia Industrial and Metrodata Electronics Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metrodata Electronics Tbk 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 Metrodata Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metrodata Electronics Tbk has no effect on the direction of Kedawung Setia i.e., Kedawung Setia and Metrodata Electronics go up and down completely randomly.

Pair Corralation between Kedawung Setia and Metrodata Electronics

Assuming the 90 days trading horizon Kedawung Setia Industrial is expected to generate 1.27 times more return on investment than Metrodata Electronics. However, Kedawung Setia is 1.27 times more volatile than Metrodata Electronics Tbk. It trades about 0.07 of its potential returns per unit of risk. Metrodata Electronics Tbk is currently generating about -0.08 per unit of risk. If you would invest  44,200  in Kedawung Setia Industrial on October 12, 2024 and sell it today you would earn a total of  1,400  from holding Kedawung Setia Industrial or generate 3.17% return on investment over 90 days.

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

Kedawung Setia Industrial  vs.  Metrodata Electronics Tbk

Kedawung Setia Industrial

Risk-Adjusted Performance

0 of 100

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.

Metrodata Electronics Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Kedawung Setia and Metrodata Electronics

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

The idea behind Kedawung Setia Industrial and Metrodata Electronics 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.