Correlation Between Kalbe Farma and Ramayana Lestari

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

Diversification Opportunities for Kalbe Farma and Ramayana Lestari

0.73

Correlation Coefficient

Kalbe Farma  Ramayana Lestari

Poor diversification

The 3 months correlation between Kalbe and Ramayana is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Kalbe Farma Tbk and Ramayana Lestari Sentosa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ramayana Lestari Sentosa 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 Ramayana Lestari. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ramayana Lestari Sentosa has no effect on the direction of Kalbe Farma i.e., Kalbe Farma and Ramayana Lestari go up and down completely randomly.

Pair Corralation between Kalbe Farma and Ramayana Lestari

Assuming the 90 days trading horizon Kalbe Farma Tbk is expected to under-perform the Ramayana Lestari. In addition to that, Kalbe Farma is 2.09 times more volatile than Ramayana Lestari Sentosa. It trades about -0.08 of its total potential returns per unit of risk. Ramayana Lestari Sentosa is currently generating about -0.05 per unit of volatility. If you would invest  36,800  in Ramayana Lestari Sentosa on December 31, 2024 and sell it today you would lose (1,600) from holding Ramayana Lestari Sentosa or give up 4.35% of portfolio value over 90 days.

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

Kalbe Farma Tbk  vs.  Ramayana Lestari Sentosa

Kalbe Farma Tbk

Risk-Adjusted Performance

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 May 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Ramayana Lestari Sentosa

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ramayana Lestari Sentosa has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Ramayana Lestari 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 Kalbe Farma and Ramayana Lestari

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

The idea behind Kalbe Farma Tbk and Ramayana Lestari Sentosa 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.