Correlation Between Kawasan Industri and Sentul City

Can any of the company-specific risk be diversified away by investing in both Kawasan Industri and Sentul City 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 Kawasan Industri and Sentul City into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kawasan Industri Jababeka and Sentul City Tbk, you can compare the effects of market volatilities on Kawasan Industri and Sentul City 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 Kawasan Industri with a short position of Sentul City. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kawasan Industri and Sentul City.

Diversification Opportunities for Kawasan Industri and Sentul City

-0.26

Correlation Coefficient

Kawasan Industri  Sentul City

Very good diversification

The 3 months correlation between Kawasan and Sentul is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Kawasan Industri Jababeka and Sentul City Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sentul City Tbk and Kawasan Industri 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 Kawasan Industri Jababeka are associated (or correlated) with Sentul City. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sentul City Tbk has no effect on the direction of Kawasan Industri i.e., Kawasan Industri and Sentul City go up and down completely randomly.

Pair Corralation between Kawasan Industri and Sentul City

Assuming the 90 days trading horizon Kawasan Industri Jababeka is expected to generate 0.61 times more return on investment than Sentul City. However, Kawasan Industri Jababeka is 1.64 times less risky than Sentul City. It trades about 0.23 of its potential returns per unit of risk. Sentul City Tbk is currently generating about 0.13 per unit of risk. If you would invest  15,300  in Kawasan Industri Jababeka on September 4, 2024 and sell it today you would earn a total of  4,300  from holding Kawasan Industri Jababeka or generate 28.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Kawasan Industri Jababeka  vs.  Sentul City Tbk

Kawasan Industri Jababeka

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kawasan Industri Jababeka are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Kawasan Industri disclosed solid returns over the last few months and may actually be approaching a breakup point.

Sentul City Tbk

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sentul City Tbk are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward-looking signals, Sentul City disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kawasan Industri and Sentul City

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

The idea behind Kawasan Industri Jababeka and Sentul City 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.