Correlation Between Krakatau Steel and Timah Persero

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

Diversification Opportunities for Krakatau Steel and Timah Persero

0.47

Correlation Coefficient

Krakatau Steel  Timah Persero

Very weak diversification

The 3 months correlation between Krakatau and Timah is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Krakatau Steel Persero and Timah Persero Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Timah Persero 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 Timah Persero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Timah Persero Tbk has no effect on the direction of Krakatau Steel i.e., Krakatau Steel and Timah Persero go up and down completely randomly.

Pair Corralation between Krakatau Steel and Timah Persero

Assuming the 90 days trading horizon Krakatau Steel Persero is expected to generate 1.52 times more return on investment than Timah Persero. However, Krakatau Steel is 1.52 times more volatile than Timah Persero Tbk. It trades about 0.06 of its potential returns per unit of risk. Timah Persero Tbk is currently generating about -0.04 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	Weak
Accuracy	100.0%
Values	Daily Returns

Krakatau Steel Persero  vs.  Timah Persero 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.

Timah Persero Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Timah Persero 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.

Pair Trading with Krakatau Steel and Timah Persero

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

The idea behind Krakatau Steel Persero and Timah Persero 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.