Correlation Between Kedaung Indah and Bumi Teknokultura

Can any of the company-specific risk be diversified away by investing in both Kedaung Indah and Bumi Teknokultura 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 Kedaung Indah and Bumi Teknokultura into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kedaung Indah Can and Bumi Teknokultura Unggul, you can compare the effects of market volatilities on Kedaung Indah and Bumi Teknokultura 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 Kedaung Indah with a short position of Bumi Teknokultura. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kedaung Indah and Bumi Teknokultura.

Diversification Opportunities for Kedaung Indah and Bumi Teknokultura

-0.48

Correlation Coefficient

Kedaung Indah  Bumi Teknokultura

Very good diversification

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

Pair Corralation between Kedaung Indah and Bumi Teknokultura

Assuming the 90 days trading horizon Kedaung Indah Can is expected to under-perform the Bumi Teknokultura. But the stock apears to be less risky and, when comparing its historical volatility, Kedaung Indah Can is 2.15 times less risky than Bumi Teknokultura. The stock trades about -0.02 of its potential returns per unit of risk. The Bumi Teknokultura Unggul is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  400.00  in Bumi Teknokultura Unggul on December 22, 2024 and sell it today you would earn a total of  500.00  from holding Bumi Teknokultura Unggul or generate 125.0% return on investment over 90 days.

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

Kedaung Indah Can  vs.  Bumi Teknokultura Unggul

Kedaung Indah Can

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kedaung Indah Can has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Kedaung Indah is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Bumi Teknokultura Unggul

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bumi Teknokultura Unggul are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Bumi Teknokultura disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kedaung Indah and Bumi Teknokultura

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

The idea behind Kedaung Indah Can and Bumi Teknokultura Unggul 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.