Correlation Between Kawasan Industri and Bakrieland Development

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

Diversification Opportunities for Kawasan Industri and Bakrieland Development

0.29

Correlation Coefficient

Kawasan Industri  Bakrieland Development

Modest diversification

The 3 months correlation between Kawasan and Bakrieland is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Kawasan Industri Jababeka and Bakrieland Development Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bakrieland Development 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 Bakrieland Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bakrieland Development has no effect on the direction of Kawasan Industri i.e., Kawasan Industri and Bakrieland Development go up and down completely randomly.

Pair Corralation between Kawasan Industri and Bakrieland Development

Assuming the 90 days trading horizon Kawasan Industri is expected to generate 1.35 times less return on investment than Bakrieland Development. But when comparing it to its historical volatility, Kawasan Industri Jababeka is 3.69 times less risky than Bakrieland Development. It trades about 0.22 of its potential returns per unit of risk. Bakrieland Development Tbk is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  800.00  in Bakrieland Development Tbk on September 1, 2024 and sell it today you would earn a total of  400.00  from holding Bakrieland Development Tbk or generate 50.0% return on investment over 90 days.

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

Kawasan Industri Jababeka  vs.  Bakrieland Development Tbk

Kawasan Industri Jababeka

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kawasan Industri Jababeka are ranked lower than 17 (%) 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.

Bakrieland Development

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Kawasan Industri and Bakrieland Development

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

The idea behind Kawasan Industri Jababeka and Bakrieland 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.