Correlation Between Kawasan Industri and Darma Henwa

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

Diversification Opportunities for Kawasan Industri and Darma Henwa

0.45

Correlation Coefficient

Kawasan Industri  Darma Henwa

Very weak diversification

The 3 months correlation between Kawasan and Darma is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Kawasan Industri Jababeka and Darma Henwa Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Darma Henwa 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 Darma Henwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Darma Henwa Tbk has no effect on the direction of Kawasan Industri i.e., Kawasan Industri and Darma Henwa go up and down completely randomly.

Pair Corralation between Kawasan Industri and Darma Henwa

Assuming the 90 days trading horizon Kawasan Industri Jababeka is expected to generate 0.29 times more return on investment than Darma Henwa. However, Kawasan Industri Jababeka is 3.44 times less risky than Darma Henwa. It trades about -0.03 of its potential returns per unit of risk. Darma Henwa Tbk is currently generating about -0.02 per unit of risk. If you would invest  19,300  in Kawasan Industri Jababeka on October 22, 2024 and sell it today you would lose (300.00) from holding Kawasan Industri Jababeka or give up 1.55% of portfolio value over 90 days.

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

Kawasan Industri Jababeka  vs.  Darma Henwa Tbk

Kawasan Industri Jababeka

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kawasan Industri Jababeka has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Kawasan Industri is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Darma Henwa Tbk

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Darma Henwa Tbk are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Darma Henwa may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Kawasan Industri and Darma Henwa

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

The idea behind Kawasan Industri Jababeka and Darma Henwa 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.