Correlation Between PT Steel and Tokyu Construction

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

By analyzing existing cross correlation between PT Steel Pipe and Tokyu Construction Co, you can compare the effects of market volatilities on PT Steel and Tokyu Construction 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 PT Steel with a short position of Tokyu Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Steel and Tokyu Construction.

Diversification Opportunities for PT Steel and Tokyu Construction

0.02

Correlation Coefficient

PT Steel  Tokyu Construction

Significant diversification

The 3 months correlation between S08 and Tokyu is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding PT Steel Pipe and Tokyu Construction Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokyu Construction and PT 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 PT Steel Pipe are associated (or correlated) with Tokyu Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokyu Construction has no effect on the direction of PT Steel i.e., PT Steel and Tokyu Construction go up and down completely randomly.

Pair Corralation between PT Steel and Tokyu Construction

Assuming the 90 days horizon PT Steel Pipe is expected to generate 11.51 times more return on investment than Tokyu Construction. However, PT Steel is 11.51 times more volatile than Tokyu Construction Co. It trades about 0.13 of its potential returns per unit of risk. Tokyu Construction Co is currently generating about 0.12 per unit of risk. If you would invest  1.25  in PT Steel Pipe on October 10, 2024 and sell it today you would earn a total of  0.20  from holding PT Steel Pipe or generate 16.0% return on investment over 90 days.

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

PT Steel Pipe  vs.  Tokyu Construction Co

PT Steel Pipe

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PT Steel Pipe are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PT Steel reported solid returns over the last few months and may actually be approaching a breakup point.

Tokyu Construction

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tokyu Construction Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Tokyu Construction is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PT Steel and Tokyu Construction

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

The idea behind PT Steel Pipe and Tokyu Construction Co 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.