Correlation Between Kawasan Industri and Ciputra Development

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

Diversification Opportunities for Kawasan Industri and Ciputra Development

-0.62

Correlation Coefficient

Kawasan Industri  Ciputra Development

Excellent diversification

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

Pair Corralation between Kawasan Industri and Ciputra Development

Assuming the 90 days trading horizon Kawasan Industri Jababeka is expected to generate 0.51 times more return on investment than Ciputra Development. However, Kawasan Industri Jababeka is 1.97 times less risky than Ciputra Development. It trades about 0.14 of its potential returns per unit of risk. Ciputra Development Tbk is currently generating about -0.14 per unit of risk. If you would invest  18,000  in Kawasan Industri Jababeka on September 12, 2024 and sell it today you would earn a total of  2,000  from holding Kawasan Industri Jababeka or generate 11.11% return on investment over 90 days.

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

Kawasan Industri Jababeka  vs.  Ciputra Development Tbk

Kawasan Industri Jababeka

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kawasan Industri Jababeka are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Kawasan Industri may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ciputra Development Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ciputra Development Tbk 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 January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Kawasan Industri and Ciputra Development

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

The idea behind Kawasan Industri Jababeka and Ciputra Development 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.

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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.