Correlation Between Kedawung Setia and Perusahaan Gas

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

Diversification Opportunities for Kedawung Setia and Perusahaan Gas

-0.23

Correlation Coefficient

Kedawung Setia  Perusahaan Gas

Very good diversification

The 3 months correlation between Kedawung and Perusahaan is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Kedawung Setia Industrial and Perusahaan Gas Negara in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perusahaan Gas Negara 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 Perusahaan Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perusahaan Gas Negara has no effect on the direction of Kedawung Setia i.e., Kedawung Setia and Perusahaan Gas go up and down completely randomly.

Pair Corralation between Kedawung Setia and Perusahaan Gas

Assuming the 90 days trading horizon Kedawung Setia is expected to generate 1.15 times less return on investment than Perusahaan Gas. In addition to that, Kedawung Setia is 1.88 times more volatile than Perusahaan Gas Negara. It trades about 0.05 of its total potential returns per unit of risk. Perusahaan Gas Negara is currently generating about 0.11 per unit of volatility. If you would invest  100,193  in Perusahaan Gas Negara on September 2, 2024 and sell it today you would earn a total of  52,307  from holding Perusahaan Gas Negara or generate 52.21% return on investment over 90 days.

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

Kedawung Setia Industrial  vs.  Perusahaan Gas Negara

Kedawung Setia Industrial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kedawung Setia Industrial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Kedawung Setia disclosed solid returns over the last few months and may actually be approaching a breakup point.

Perusahaan Gas Negara

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Perusahaan Gas Negara has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Perusahaan Gas 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 Perusahaan Gas

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

The idea behind Kedawung Setia Industrial and Perusahaan Gas Negara 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.