Correlation Between Timah Persero and Kedawung Setia

Can any of the company-specific risk be diversified away by investing in both Timah Persero and Kedawung Setia 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 Timah Persero and Kedawung Setia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Timah Persero Tbk and Kedawung Setia Industrial, you can compare the effects of market volatilities on Timah Persero and Kedawung Setia 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 Timah Persero with a short position of Kedawung Setia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Timah Persero and Kedawung Setia.

Diversification Opportunities for Timah Persero and Kedawung Setia

0.57

Correlation Coefficient

Timah Persero  Kedawung Setia

Very weak diversification

The 3 months correlation between Timah and Kedawung is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Timah Persero Tbk and Kedawung Setia Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kedawung Setia Industrial and Timah Persero 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 Timah Persero Tbk are associated (or correlated) with Kedawung Setia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kedawung Setia Industrial has no effect on the direction of Timah Persero i.e., Timah Persero and Kedawung Setia go up and down completely randomly.

Pair Corralation between Timah Persero and Kedawung Setia

Assuming the 90 days trading horizon Timah Persero Tbk is expected to under-perform the Kedawung Setia. But the stock apears to be less risky and, when comparing its historical volatility, Timah Persero Tbk is 1.38 times less risky than Kedawung Setia. The stock trades about -0.04 of its potential returns per unit of risk. The Kedawung Setia Industrial is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  45,000  in Kedawung Setia Industrial on December 31, 2024 and sell it today you would lose (4,200) from holding Kedawung Setia Industrial or give up 9.33% of portfolio value over 90 days.

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

Timah Persero Tbk  vs.  Kedawung Setia Industrial

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.

Kedawung Setia Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kedawung Setia Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Kedawung Setia 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 Timah Persero and Kedawung Setia

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

The idea behind Timah Persero Tbk and Kedawung Setia Industrial 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.