Correlation Between Wijaya Karya and Buyung Poetra

Can any of the company-specific risk be diversified away by investing in both Wijaya Karya and Buyung Poetra 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 Wijaya Karya and Buyung Poetra into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Wijaya Karya Bangunan and Buyung Poetra Sembada, you can compare the effects of market volatilities on Wijaya Karya and Buyung Poetra 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 Wijaya Karya with a short position of Buyung Poetra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wijaya Karya and Buyung Poetra.

Diversification Opportunities for Wijaya Karya and Buyung Poetra

0.77

Correlation Coefficient

Wijaya Karya  Buyung Poetra

Poor diversification

The 3 months correlation between Wijaya and Buyung is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Wijaya Karya Bangunan and Buyung Poetra Sembada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Buyung Poetra Sembada and Wijaya Karya 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 Wijaya Karya Bangunan are associated (or correlated) with Buyung Poetra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Buyung Poetra Sembada has no effect on the direction of Wijaya Karya i.e., Wijaya Karya and Buyung Poetra go up and down completely randomly.

Pair Corralation between Wijaya Karya and Buyung Poetra

Assuming the 90 days trading horizon Wijaya Karya Bangunan is expected to under-perform the Buyung Poetra. But the stock apears to be less risky and, when comparing its historical volatility, Wijaya Karya Bangunan is 1.15 times less risky than Buyung Poetra. The stock trades about -0.26 of its potential returns per unit of risk. The Buyung Poetra Sembada is currently generating about -0.21 of returns per unit of risk over similar time horizon. If you would invest  12,600  in Buyung Poetra Sembada on December 4, 2024 and sell it today you would lose (3,700) from holding Buyung Poetra Sembada or give up 29.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.28%
Values	Daily Returns

Wijaya Karya Bangunan  vs.  Buyung Poetra Sembada

Wijaya Karya Bangunan

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wijaya Karya Bangunan 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.

Buyung Poetra Sembada

Risk-Adjusted Performance

Very Weak

Over the last 90 days Buyung Poetra Sembada 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 Wijaya Karya and Buyung Poetra

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

The idea behind Wijaya Karya Bangunan and Buyung Poetra Sembada 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.