Correlation Between Kalbe Farma and Indocement Tunggal

Can any of the company-specific risk be diversified away by investing in both Kalbe Farma and Indocement Tunggal 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 Kalbe Farma and Indocement Tunggal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kalbe Farma Tbk and Indocement Tunggal Prakarsa, you can compare the effects of market volatilities on Kalbe Farma and Indocement Tunggal 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 Kalbe Farma with a short position of Indocement Tunggal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kalbe Farma and Indocement Tunggal.

Diversification Opportunities for Kalbe Farma and Indocement Tunggal

0.12

Correlation Coefficient

Kalbe Farma  Indocement Tunggal

Average diversification

The 3 months correlation between Kalbe and Indocement is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Kalbe Farma Tbk and Indocement Tunggal Prakarsa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indocement Tunggal and Kalbe Farma 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 Kalbe Farma Tbk are associated (or correlated) with Indocement Tunggal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indocement Tunggal has no effect on the direction of Kalbe Farma i.e., Kalbe Farma and Indocement Tunggal go up and down completely randomly.

Pair Corralation between Kalbe Farma and Indocement Tunggal

Assuming the 90 days trading horizon Kalbe Farma Tbk is expected to under-perform the Indocement Tunggal. In addition to that, Kalbe Farma is 1.22 times more volatile than Indocement Tunggal Prakarsa. It trades about 0.0 of its total potential returns per unit of risk. Indocement Tunggal Prakarsa is currently generating about 0.1 per unit of volatility. If you would invest  705,000  in Indocement Tunggal Prakarsa on September 13, 2024 and sell it today you would earn a total of  17,500  from holding Indocement Tunggal Prakarsa or generate 2.48% return on investment over 90 days.

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

Kalbe Farma Tbk  vs.  Indocement Tunggal Prakarsa

Kalbe Farma Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kalbe Farma Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Indocement Tunggal

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Indocement Tunggal Prakarsa are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Indocement Tunggal may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Kalbe Farma and Indocement Tunggal

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

The idea behind Kalbe Farma Tbk and Indocement Tunggal Prakarsa 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.