Correlation Between Kencana Energi and Paramita Bangun

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

Diversification Opportunities for Kencana Energi and Paramita Bangun

-0.52

Correlation Coefficient

Kencana Energi  Paramita Bangun

Excellent diversification

The 3 months correlation between Kencana and Paramita is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Kencana Energi Lestari and Paramita Bangun Sarana in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paramita Bangun Sarana 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 Paramita Bangun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paramita Bangun Sarana has no effect on the direction of Kencana Energi i.e., Kencana Energi and Paramita Bangun go up and down completely randomly.

Pair Corralation between Kencana Energi and Paramita Bangun

Assuming the 90 days trading horizon Kencana Energi Lestari is expected to under-perform the Paramita Bangun. But the stock apears to be less risky and, when comparing its historical volatility, Kencana Energi Lestari is 1.23 times less risky than Paramita Bangun. The stock trades about -0.13 of its potential returns per unit of risk. The Paramita Bangun Sarana is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  29,200  in Paramita Bangun Sarana on October 11, 2024 and sell it today you would earn a total of  6,200  from holding Paramita Bangun Sarana or generate 21.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Kencana Energi Lestari  vs.  Paramita Bangun Sarana

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.

Paramita Bangun Sarana

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Paramita Bangun Sarana are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Paramita Bangun disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kencana Energi and Paramita Bangun

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

The idea behind Kencana Energi Lestari and Paramita Bangun Sarana 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.