Correlation Between Kedaung Indah and Petrosea Tbk

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

Diversification Opportunities for Kedaung Indah and Petrosea Tbk

-0.31

Correlation Coefficient

Kedaung Indah  Petrosea Tbk

Very good diversification

The 3 months correlation between Kedaung and Petrosea is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Kedaung Indah Can and Petrosea Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrosea Tbk 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 Petrosea Tbk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petrosea Tbk has no effect on the direction of Kedaung Indah i.e., Kedaung Indah and Petrosea Tbk go up and down completely randomly.

Pair Corralation between Kedaung Indah and Petrosea Tbk

Assuming the 90 days trading horizon Kedaung Indah is expected to generate 7.98 times less return on investment than Petrosea Tbk. In addition to that, Kedaung Indah is 1.12 times more volatile than Petrosea Tbk. It trades about 0.02 of its total potential returns per unit of risk. Petrosea Tbk is currently generating about 0.16 per unit of volatility. If you would invest  37,809  in Petrosea Tbk on December 3, 2024 and sell it today you would earn a total of  298,191  from holding Petrosea Tbk or generate 788.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.68%
Values	Daily Returns

Kedaung Indah Can  vs.  Petrosea Tbk

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 conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Petrosea Tbk

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Petrosea Tbk are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Petrosea Tbk disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kedaung Indah and Petrosea Tbk

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

The idea behind Kedaung Indah Can and Petrosea Tbk 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.