Correlation Between Kedaung Indah and Wijaya Karya

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

Diversification Opportunities for Kedaung Indah and Wijaya Karya

0.62

Correlation Coefficient

Kedaung Indah  Wijaya Karya

Poor diversification

The 3 months correlation between Kedaung and Wijaya is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Kedaung Indah Can and Wijaya Karya Beton in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wijaya Karya Beton 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 Wijaya Karya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wijaya Karya Beton has no effect on the direction of Kedaung Indah i.e., Kedaung Indah and Wijaya Karya go up and down completely randomly.

Pair Corralation between Kedaung Indah and Wijaya Karya

Assuming the 90 days trading horizon Kedaung Indah Can is expected to under-perform the Wijaya Karya. In addition to that, Kedaung Indah is 1.02 times more volatile than Wijaya Karya Beton. It trades about -0.01 of its total potential returns per unit of risk. Wijaya Karya Beton is currently generating about 0.02 per unit of volatility. If you would invest  7,700  in Wijaya Karya Beton on December 30, 2024 and sell it today you would lose (100.00) from holding Wijaya Karya Beton or give up 1.3% of portfolio value over 90 days.

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

Kedaung Indah Can  vs.  Wijaya Karya Beton

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.

Wijaya Karya Beton

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wijaya Karya Beton are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Wijaya Karya may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Kedaung Indah and Wijaya Karya

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

The idea behind Kedaung Indah Can and Wijaya Karya Beton 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.