Correlation Between Total Bangun and Kalbe Farma

Can any of the company-specific risk be diversified away by investing in both Total Bangun and Kalbe Farma 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 Kalbe Farma 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 Kalbe Farma Tbk, you can compare the effects of market volatilities on Total Bangun and Kalbe Farma 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 Kalbe Farma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Total Bangun and Kalbe Farma.

Diversification Opportunities for Total Bangun and Kalbe Farma

0.64

Correlation Coefficient

Total Bangun  Kalbe Farma

Poor diversification

The 3 months correlation between Total and Kalbe is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Total Bangun Persada and Kalbe Farma Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kalbe Farma Tbk 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 Kalbe Farma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kalbe Farma Tbk has no effect on the direction of Total Bangun i.e., Total Bangun and Kalbe Farma go up and down completely randomly.

Pair Corralation between Total Bangun and Kalbe Farma

Assuming the 90 days trading horizon Total Bangun Persada is expected to under-perform the Kalbe Farma. But the stock apears to be less risky and, when comparing its historical volatility, Total Bangun Persada is 1.22 times less risky than Kalbe Farma. The stock trades about -0.11 of its potential returns per unit of risk. The Kalbe Farma Tbk is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  136,000  in Kalbe Farma Tbk on December 30, 2024 and sell it today you would lose (22,500) from holding Kalbe Farma Tbk or give up 16.54% of portfolio value over 90 days.

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

Total Bangun Persada  vs.  Kalbe Farma Tbk

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.

Kalbe Farma Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kalbe Farma Tbk 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.

Pair Trading with Total Bangun and Kalbe Farma

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

The idea behind Total Bangun Persada and Kalbe Farma Tbk 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.