Correlation Between Total Bangun and Kawasan Industri

Can any of the company-specific risk be diversified away by investing in both Total Bangun and Kawasan Industri 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 Total Bangun and Kawasan Industri into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Total Bangun Persada and Kawasan Industri Jababeka, you can compare the effects of market volatilities on Total Bangun and Kawasan Industri 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 Total Bangun with a short position of Kawasan Industri. Check out your portfolio center. Please also check ongoing floating volatility patterns of Total Bangun and Kawasan Industri.

Diversification Opportunities for Total Bangun and Kawasan Industri

0.9

Correlation Coefficient

Total Bangun  Kawasan Industri

Almost no diversification

The 3 months correlation between Total and Kawasan is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Total Bangun Persada and Kawasan Industri Jababeka in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kawasan Industri Jababeka and Total Bangun 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 Total Bangun Persada are associated (or correlated) with Kawasan Industri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kawasan Industri Jababeka has no effect on the direction of Total Bangun i.e., Total Bangun and Kawasan Industri go up and down completely randomly.

Pair Corralation between Total Bangun and Kawasan Industri

Assuming the 90 days trading horizon Total Bangun Persada is expected to under-perform the Kawasan Industri. In addition to that, Total Bangun is 1.94 times more volatile than Kawasan Industri Jababeka. It trades about -0.11 of its total potential returns per unit of risk. Kawasan Industri Jababeka is currently generating about -0.05 per unit of volatility. If you would invest  18,600  in Kawasan Industri Jababeka on December 30, 2024 and sell it today you would lose (700.00) from holding Kawasan Industri Jababeka or give up 3.76% of portfolio value over 90 days.

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

Total Bangun Persada  vs.  Kawasan Industri Jababeka

Total Bangun Persada

Risk-Adjusted Performance

Very Weak

Over the last 90 days Total Bangun Persada 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 April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Kawasan Industri Jababeka

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kawasan Industri Jababeka has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Kawasan Industri 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 Total Bangun and Kawasan Industri

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

The idea behind Total Bangun Persada and Kawasan Industri Jababeka 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.