Correlation Between Kawasan Industri and Energi Mega

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

Diversification Opportunities for Kawasan Industri and Energi Mega

0.06

Correlation Coefficient

Kawasan Industri  Energi Mega

Significant diversification

The 3 months correlation between Kawasan and Energi is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Kawasan Industri Jababeka and Energi Mega Persada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energi Mega Persada 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 Energi Mega. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energi Mega Persada has no effect on the direction of Kawasan Industri i.e., Kawasan Industri and Energi Mega go up and down completely randomly.

Pair Corralation between Kawasan Industri and Energi Mega

Assuming the 90 days trading horizon Kawasan Industri is expected to generate 8.64 times less return on investment than Energi Mega. But when comparing it to its historical volatility, Kawasan Industri Jababeka is 2.4 times less risky than Energi Mega. It trades about 0.06 of its potential returns per unit of risk. Energi Mega Persada is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  22,200  in Energi Mega Persada on October 22, 2024 and sell it today you would earn a total of  2,200  from holding Energi Mega Persada or generate 9.91% return on investment over 90 days.

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

Kawasan Industri Jababeka  vs.  Energi Mega Persada

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.

Energi Mega Persada

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Energi Mega Persada has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Energi Mega 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 Energi Mega

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

The idea behind Kawasan Industri Jababeka and Energi Mega Persada 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.