Correlation Between Kalbe Farma and Japfa Comfeed

Can any of the company-specific risk be diversified away by investing in both Kalbe Farma and Japfa Comfeed 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 Japfa Comfeed 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 Japfa Comfeed Indonesia, you can compare the effects of market volatilities on Kalbe Farma and Japfa Comfeed 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 Japfa Comfeed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kalbe Farma and Japfa Comfeed.

Diversification Opportunities for Kalbe Farma and Japfa Comfeed

-0.79

Correlation Coefficient

Kalbe Farma  Japfa Comfeed

Pay attention - limited upside

The 3 months correlation between Kalbe and Japfa is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Kalbe Farma Tbk and Japfa Comfeed Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japfa Comfeed Indonesia 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 Japfa Comfeed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japfa Comfeed Indonesia has no effect on the direction of Kalbe Farma i.e., Kalbe Farma and Japfa Comfeed go up and down completely randomly.

Pair Corralation between Kalbe Farma and Japfa Comfeed

Assuming the 90 days trading horizon Kalbe Farma Tbk is expected to under-perform the Japfa Comfeed. But the stock apears to be less risky and, when comparing its historical volatility, Kalbe Farma Tbk is 1.53 times less risky than Japfa Comfeed. The stock trades about -0.1 of its potential returns per unit of risk. The Japfa Comfeed Indonesia is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  151,109  in Japfa Comfeed Indonesia on September 3, 2024 and sell it today you would earn a total of  20,391  from holding Japfa Comfeed Indonesia or generate 13.49% return on investment over 90 days.

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

Kalbe Farma Tbk  vs.  Japfa Comfeed Indonesia

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 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.

Japfa Comfeed Indonesia

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Japfa Comfeed Indonesia are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Japfa Comfeed disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kalbe Farma and Japfa Comfeed

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

The idea behind Kalbe Farma Tbk and Japfa Comfeed Indonesia 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.