Correlation Between Kencana Energi and Nusantara Almazia

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

Diversification Opportunities for Kencana Energi and Nusantara Almazia

0.48

Correlation Coefficient

Kencana Energi  Nusantara Almazia

Very weak diversification

The 3 months correlation between Kencana and Nusantara is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Kencana Energi Lestari and Nusantara Almazia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nusantara Almazia 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 Nusantara Almazia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nusantara Almazia has no effect on the direction of Kencana Energi i.e., Kencana Energi and Nusantara Almazia go up and down completely randomly.

Pair Corralation between Kencana Energi and Nusantara Almazia

Assuming the 90 days trading horizon Kencana Energi Lestari is expected to under-perform the Nusantara Almazia. But the stock apears to be less risky and, when comparing its historical volatility, Kencana Energi Lestari is 6.58 times less risky than Nusantara Almazia. The stock trades about -0.15 of its potential returns per unit of risk. The Nusantara Almazia is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  8,500  in Nusantara Almazia on September 3, 2024 and sell it today you would lose (1,600) from holding Nusantara Almazia or give up 18.82% of portfolio value over 90 days.

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

Kencana Energi Lestari  vs.  Nusantara Almazia

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.

Nusantara Almazia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nusantara Almazia 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 Nusantara Almazia

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

The idea behind Kencana Energi Lestari and Nusantara Almazia 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.