Correlation Between Resource Alam and Kmi Wire

Can any of the company-specific risk be diversified away by investing in both Resource Alam and Kmi Wire 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 Resource Alam and Kmi Wire into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Resource Alam Indonesia and Kmi Wire And, you can compare the effects of market volatilities on Resource Alam and Kmi Wire 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 Resource Alam with a short position of Kmi Wire. Check out your portfolio center. Please also check ongoing floating volatility patterns of Resource Alam and Kmi Wire.

Diversification Opportunities for Resource Alam and Kmi Wire

0.54

Correlation Coefficient

Resource Alam  Kmi Wire

Very weak diversification

The 3 months correlation between Resource and Kmi is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Resource Alam Indonesia and Kmi Wire And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kmi Wire And and Resource Alam 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 Resource Alam Indonesia are associated (or correlated) with Kmi Wire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kmi Wire And has no effect on the direction of Resource Alam i.e., Resource Alam and Kmi Wire go up and down completely randomly.

Pair Corralation between Resource Alam and Kmi Wire

Assuming the 90 days trading horizon Resource Alam Indonesia is expected to generate 0.91 times more return on investment than Kmi Wire. However, Resource Alam Indonesia is 1.09 times less risky than Kmi Wire. It trades about -0.11 of its potential returns per unit of risk. Kmi Wire And is currently generating about -0.11 per unit of risk. If you would invest  55,500  in Resource Alam Indonesia on September 12, 2024 and sell it today you would lose (2,000) from holding Resource Alam Indonesia or give up 3.6% of portfolio value over 90 days.

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

Resource Alam Indonesia  vs.  Kmi Wire And

Resource Alam Indonesia

Risk-Adjusted Performance

0 of 100

Very Weak

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

Kmi Wire And

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kmi Wire And 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 Resource Alam and Kmi Wire

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

The idea behind Resource Alam Indonesia and Kmi Wire And 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.