Correlation Between Kalbe Farma and Tunas Baru

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

Diversification Opportunities for Kalbe Farma and Tunas Baru

-0.66

Correlation Coefficient

Kalbe Farma  Tunas Baru

Excellent diversification

The 3 months correlation between Kalbe and Tunas is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Kalbe Farma Tbk and Tunas Baru Lampung in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tunas Baru Lampung 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 Tunas Baru. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tunas Baru Lampung has no effect on the direction of Kalbe Farma i.e., Kalbe Farma and Tunas Baru go up and down completely randomly.

Pair Corralation between Kalbe Farma and Tunas Baru

Assuming the 90 days trading horizon Kalbe Farma Tbk is expected to under-perform the Tunas Baru. In addition to that, Kalbe Farma is 1.42 times more volatile than Tunas Baru Lampung. It trades about -0.1 of its total potential returns per unit of risk. Tunas Baru Lampung is currently generating about 0.07 per unit of volatility. If you would invest  60,800  in Tunas Baru Lampung on September 2, 2024 and sell it today you would earn a total of  2,700  from holding Tunas Baru Lampung or generate 4.44% 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.  Tunas Baru Lampung

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.

Tunas Baru Lampung

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tunas Baru Lampung are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Tunas Baru 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 Tunas Baru

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

The idea behind Kalbe Farma Tbk and Tunas Baru Lampung 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.