Correlation Between Kencana Energi and Bangun Karya

Can any of the company-specific risk be diversified away by investing in both Kencana Energi and Bangun Karya 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 Kencana Energi and Bangun Karya into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kencana Energi Lestari and Bangun Karya Perkasa, you can compare the effects of market volatilities on Kencana Energi and Bangun Karya 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 Kencana Energi with a short position of Bangun Karya. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kencana Energi and Bangun Karya.

Diversification Opportunities for Kencana Energi and Bangun Karya

0.65

Correlation Coefficient

Kencana Energi  Bangun Karya

Poor diversification

The 3 months correlation between Kencana and Bangun is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Kencana Energi Lestari and Bangun Karya Perkasa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bangun Karya Perkasa and Kencana Energi 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 Kencana Energi Lestari are associated (or correlated) with Bangun Karya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bangun Karya Perkasa has no effect on the direction of Kencana Energi i.e., Kencana Energi and Bangun Karya go up and down completely randomly.

Pair Corralation between Kencana Energi and Bangun Karya

Assuming the 90 days trading horizon Kencana Energi Lestari is expected to under-perform the Bangun Karya. But the stock apears to be less risky and, when comparing its historical volatility, Kencana Energi Lestari is 1.57 times less risky than Bangun Karya. The stock trades about -0.09 of its potential returns per unit of risk. The Bangun Karya Perkasa is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  5,700  in Bangun Karya Perkasa on September 12, 2024 and sell it today you would lose (400.00) from holding Bangun Karya Perkasa or give up 7.02% of portfolio value over 90 days.

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

Kencana Energi Lestari  vs.  Bangun Karya Perkasa

Kencana Energi Lestari

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kencana Energi Lestari 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.

Bangun Karya Perkasa

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bangun Karya Perkasa 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 Kencana Energi and Bangun Karya

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

The idea behind Kencana Energi Lestari and Bangun Karya Perkasa 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.