Correlation Between Semen Indonesia and Indah Kiat

Can any of the company-specific risk be diversified away by investing in both Semen Indonesia and Indah Kiat 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 Semen Indonesia and Indah Kiat into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Semen Indonesia Persero and Indah Kiat Pulp, you can compare the effects of market volatilities on Semen Indonesia and Indah Kiat 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 Semen Indonesia with a short position of Indah Kiat. Check out your portfolio center. Please also check ongoing floating volatility patterns of Semen Indonesia and Indah Kiat.

Diversification Opportunities for Semen Indonesia and Indah Kiat

0.68

Correlation Coefficient

Semen Indonesia  Indah Kiat

Poor diversification

The 3 months correlation between Semen and Indah is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Semen Indonesia Persero and Indah Kiat Pulp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indah Kiat Pulp and Semen Indonesia 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 Semen Indonesia Persero are associated (or correlated) with Indah Kiat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indah Kiat Pulp has no effect on the direction of Semen Indonesia i.e., Semen Indonesia and Indah Kiat go up and down completely randomly.

Pair Corralation between Semen Indonesia and Indah Kiat

Assuming the 90 days trading horizon Semen Indonesia Persero is expected to under-perform the Indah Kiat. But the stock apears to be less risky and, when comparing its historical volatility, Semen Indonesia Persero is 1.12 times less risky than Indah Kiat. The stock trades about -0.07 of its potential returns per unit of risk. The Indah Kiat Pulp is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  957,914  in Indah Kiat Pulp on September 5, 2024 and sell it today you would lose (237,914) from holding Indah Kiat Pulp or give up 24.84% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

Semen Indonesia Persero  vs.  Indah Kiat Pulp

Semen Indonesia Persero

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Semen Indonesia Persero 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 January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Indah Kiat Pulp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indah Kiat Pulp 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 January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Semen Indonesia and Indah Kiat

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

The idea behind Semen Indonesia Persero and Indah Kiat Pulp 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.