Correlation Between Kencana Energi and Emdeki Utama

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

Diversification Opportunities for Kencana Energi and Emdeki Utama

0.93

Correlation Coefficient

Kencana Energi  Emdeki Utama

Almost no diversification

The 3 months correlation between Kencana and Emdeki is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Kencana Energi Lestari and Emdeki Utama Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emdeki Utama Tbk 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 Emdeki Utama. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emdeki Utama Tbk has no effect on the direction of Kencana Energi i.e., Kencana Energi and Emdeki Utama go up and down completely randomly.

Pair Corralation between Kencana Energi and Emdeki Utama

Assuming the 90 days trading horizon Kencana Energi Lestari is expected to generate 3.17 times more return on investment than Emdeki Utama. However, Kencana Energi is 3.17 times more volatile than Emdeki Utama Tbk. It trades about 0.03 of its potential returns per unit of risk. Emdeki Utama Tbk is currently generating about 0.01 per unit of risk. If you would invest  51,967  in Kencana Energi Lestari on October 11, 2024 and sell it today you would earn a total of  11,533  from holding Kencana Energi Lestari or generate 22.19% return on investment over 90 days.

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

Kencana Energi Lestari  vs.  Emdeki Utama Tbk

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 conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Emdeki Utama Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Emdeki Utama Tbk 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 Emdeki Utama

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

The idea behind Kencana Energi Lestari and Emdeki Utama 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.