Correlation Between Kencana Energi and Terregra Asia

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

Diversification Opportunities for Kencana Energi and Terregra Asia

-0.3

Correlation Coefficient

Kencana Energi  Terregra Asia

Very good diversification

The 3 months correlation between Kencana and Terregra is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Kencana Energi Lestari and Terregra Asia Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terregra Asia Energy 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 Terregra Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terregra Asia Energy has no effect on the direction of Kencana Energi i.e., Kencana Energi and Terregra Asia go up and down completely randomly.

Pair Corralation between Kencana Energi and Terregra Asia

Assuming the 90 days trading horizon Kencana Energi is expected to generate 6.84 times less return on investment than Terregra Asia. But when comparing it to its historical volatility, Kencana Energi Lestari is 1.83 times less risky than Terregra Asia. It trades about 0.13 of its potential returns per unit of risk. Terregra Asia Energy is currently generating about 0.49 of returns per unit of risk over similar time horizon. If you would invest  2,900  in Terregra Asia Energy on October 26, 2024 and sell it today you would earn a total of  2,000  from holding Terregra Asia Energy or generate 68.97% return on investment over 90 days.

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

Kencana Energi Lestari  vs.  Terregra Asia Energy

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 quite persistent forward-looking signals, Kencana Energi is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Terregra Asia Energy

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Terregra Asia Energy are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Terregra Asia disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kencana Energi and Terregra Asia

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

The idea behind Kencana Energi Lestari and Terregra Asia Energy 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.