Correlation Between Krakatau Steel and Bank BRISyariah

Can any of the company-specific risk be diversified away by investing in both Krakatau Steel and Bank BRISyariah 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 Krakatau Steel and Bank BRISyariah into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Krakatau Steel Persero and Bank BRISyariah Tbk, you can compare the effects of market volatilities on Krakatau Steel and Bank BRISyariah 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 Krakatau Steel with a short position of Bank BRISyariah. Check out your portfolio center. Please also check ongoing floating volatility patterns of Krakatau Steel and Bank BRISyariah.

Diversification Opportunities for Krakatau Steel and Bank BRISyariah

0.1

Correlation Coefficient

Krakatau Steel  Bank BRISyariah

Average diversification

The 3 months correlation between Krakatau and Bank is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Krakatau Steel Persero and Bank BRISyariah Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank BRISyariah Tbk and Krakatau Steel 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 Krakatau Steel Persero are associated (or correlated) with Bank BRISyariah. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank BRISyariah Tbk has no effect on the direction of Krakatau Steel i.e., Krakatau Steel and Bank BRISyariah go up and down completely randomly.

Pair Corralation between Krakatau Steel and Bank BRISyariah

Assuming the 90 days trading horizon Krakatau Steel Persero is expected to generate 1.61 times more return on investment than Bank BRISyariah. However, Krakatau Steel is 1.61 times more volatile than Bank BRISyariah Tbk. It trades about 0.06 of its potential returns per unit of risk. Bank BRISyariah Tbk is currently generating about -0.08 per unit of risk. If you would invest  10,600  in Krakatau Steel Persero on December 31, 2024 and sell it today you would earn a total of  1,300  from holding Krakatau Steel Persero or generate 12.26% return on investment over 90 days.

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

Krakatau Steel Persero  vs.  Bank BRISyariah Tbk

Krakatau Steel Persero

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Krakatau Steel Persero are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Krakatau Steel disclosed solid returns over the last few months and may actually be approaching a breakup point.

Bank BRISyariah Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bank BRISyariah 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.

Pair Trading with Krakatau Steel and Bank BRISyariah

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

The idea behind Krakatau Steel Persero and Bank BRISyariah Tbk 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.