Correlation Between Kedaung Indah and Gunawan Dianjaya

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

Diversification Opportunities for Kedaung Indah and Gunawan Dianjaya

0.82

Correlation Coefficient

Kedaung Indah  Gunawan Dianjaya

Very poor diversification

The 3 months correlation between Kedaung and Gunawan is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Kedaung Indah Can and Gunawan Dianjaya Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gunawan Dianjaya Steel 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 Gunawan Dianjaya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gunawan Dianjaya Steel has no effect on the direction of Kedaung Indah i.e., Kedaung Indah and Gunawan Dianjaya go up and down completely randomly.

Pair Corralation between Kedaung Indah and Gunawan Dianjaya

Assuming the 90 days trading horizon Kedaung Indah Can is expected to under-perform the Gunawan Dianjaya. But the stock apears to be less risky and, when comparing its historical volatility, Kedaung Indah Can is 1.08 times less risky than Gunawan Dianjaya. The stock trades about -0.05 of its potential returns per unit of risk. The Gunawan Dianjaya Steel is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  12,600  in Gunawan Dianjaya Steel on September 14, 2024 and sell it today you would lose (1,100) from holding Gunawan Dianjaya Steel or give up 8.73% of portfolio value over 90 days.

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

Kedaung Indah Can  vs.  Gunawan Dianjaya Steel

Kedaung Indah Can

Risk-Adjusted Performance

0 of 100

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 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.

Gunawan Dianjaya Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gunawan Dianjaya Steel 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 Kedaung Indah and Gunawan Dianjaya

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

The idea behind Kedaung Indah Can and Gunawan Dianjaya Steel 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.