Correlation Between Nusantara Almazia and Kencana Energi

Can any of the company-specific risk be diversified away by investing in both Nusantara Almazia and Kencana Energi 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 Nusantara Almazia and Kencana Energi into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nusantara Almazia and Kencana Energi Lestari, you can compare the effects of market volatilities on Nusantara Almazia and Kencana Energi 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 Nusantara Almazia with a short position of Kencana Energi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nusantara Almazia and Kencana Energi.

Diversification Opportunities for Nusantara Almazia and Kencana Energi

0.47

Correlation Coefficient

Nusantara Almazia  Kencana Energi

Very weak diversification

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

Pair Corralation between Nusantara Almazia and Kencana Energi

Assuming the 90 days trading horizon Nusantara Almazia is expected to under-perform the Kencana Energi. In addition to that, Nusantara Almazia is 6.58 times more volatile than Kencana Energi Lestari. It trades about -0.04 of its total potential returns per unit of risk. Kencana Energi Lestari is currently generating about -0.05 per unit of volatility. If you would invest  64,500  in Kencana Energi Lestari on September 1, 2024 and sell it today you would lose (1,000.00) from holding Kencana Energi Lestari or give up 1.55% of portfolio value over 90 days.

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

Nusantara Almazia  vs.  Kencana Energi Lestari

Nusantara Almazia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nusantara Almazia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Nusantara Almazia is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Kencana Energi Lestari

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kencana Energi Lestari 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 Nusantara Almazia and Kencana Energi

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

The idea behind Nusantara Almazia and Kencana Energi Lestari 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.