Correlation Between Kawasan Industri and Duta Pertiwi

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

Diversification Opportunities for Kawasan Industri and Duta Pertiwi

0.71

Correlation Coefficient

Kawasan Industri  Duta Pertiwi

Poor diversification

The 3 months correlation between Kawasan and Duta is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Kawasan Industri Jababeka and Duta Pertiwi Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Duta Pertiwi 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 Duta Pertiwi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Duta Pertiwi Tbk has no effect on the direction of Kawasan Industri i.e., Kawasan Industri and Duta Pertiwi go up and down completely randomly.

Pair Corralation between Kawasan Industri and Duta Pertiwi

Assuming the 90 days trading horizon Kawasan Industri Jababeka is expected to generate 0.68 times more return on investment than Duta Pertiwi. However, Kawasan Industri Jababeka is 1.48 times less risky than Duta Pertiwi. It trades about -0.05 of its potential returns per unit of risk. Duta Pertiwi Tbk is currently generating about -0.09 per unit of risk. If you would invest  18,600  in Kawasan Industri Jababeka on December 30, 2024 and sell it today you would lose (700.00) from holding Kawasan Industri Jababeka or give up 3.76% of portfolio value over 90 days.

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

Kawasan Industri Jababeka  vs.  Duta Pertiwi Tbk

Kawasan Industri Jababeka

Risk-Adjusted Performance

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.

Duta Pertiwi Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Duta Pertiwi Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Kawasan Industri and Duta Pertiwi

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

The idea behind Kawasan Industri Jababeka and Duta Pertiwi 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.