Correlation Between Krakatau Steel and HK Metals

Can any of the company-specific risk be diversified away by investing in both Krakatau Steel and HK Metals 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 HK Metals 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 HK Metals Utama, you can compare the effects of market volatilities on Krakatau Steel and HK Metals 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 HK Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Krakatau Steel and HK Metals.

Diversification Opportunities for Krakatau Steel and HK Metals

0.0

Correlation Coefficient

Krakatau Steel  HK Metals

Pay attention - limited upside

The 3 months correlation between Krakatau and HKMU is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Krakatau Steel Persero and HK Metals Utama in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HK Metals Utama 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 HK Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HK Metals Utama has no effect on the direction of Krakatau Steel i.e., Krakatau Steel and HK Metals go up and down completely randomly.

Pair Corralation between Krakatau Steel and HK Metals

If you would invest  10,100  in Krakatau Steel Persero on December 28, 2024 and sell it today you would earn a total of  1,900  from holding Krakatau Steel Persero or generate 18.81% return on investment over 90 days.

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

Krakatau Steel Persero  vs.  HK Metals Utama

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 6 (%) 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.

HK Metals Utama

Risk-Adjusted Performance

Very Weak

Over the last 90 days HK Metals Utama has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, HK Metals 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 Krakatau Steel and HK Metals

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

The idea behind Krakatau Steel Persero and HK Metals Utama 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.