Correlation Between Kalbe Farma and Wijaya Karya

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

Diversification Opportunities for Kalbe Farma and Wijaya Karya

0.78

Correlation Coefficient

Kalbe Farma  Wijaya Karya

Poor diversification

The 3 months correlation between Kalbe and Wijaya is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Kalbe Farma Tbk and Wijaya Karya Beton in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wijaya Karya Beton 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 Wijaya Karya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wijaya Karya Beton has no effect on the direction of Kalbe Farma i.e., Kalbe Farma and Wijaya Karya go up and down completely randomly.

Pair Corralation between Kalbe Farma and Wijaya Karya

Assuming the 90 days trading horizon Kalbe Farma Tbk is expected to generate 0.45 times more return on investment than Wijaya Karya. However, Kalbe Farma Tbk is 2.22 times less risky than Wijaya Karya. It trades about -0.1 of its potential returns per unit of risk. Wijaya Karya Beton is currently generating about -0.19 per unit of risk. If you would invest  168,000  in Kalbe Farma Tbk on September 3, 2024 and sell it today you would lose (17,500) from holding Kalbe Farma Tbk or give up 10.42% 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.  Wijaya Karya Beton

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.

Wijaya Karya Beton

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wijaya Karya Beton 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.

Pair Trading with Kalbe Farma and Wijaya Karya

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

The idea behind Kalbe Farma Tbk and Wijaya Karya Beton 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.