Correlation Between Wijaya Karya and Terregra Asia

Can any of the company-specific risk be diversified away by investing in both Wijaya Karya and Terregra Asia 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 Terregra Asia 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 Terregra Asia Energy, you can compare the effects of market volatilities on Wijaya Karya and Terregra Asia 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 Terregra Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wijaya Karya and Terregra Asia.

Diversification Opportunities for Wijaya Karya and Terregra Asia

-0.71

Correlation Coefficient

Wijaya Karya  Terregra Asia

Pay attention - limited upside

The 3 months correlation between Wijaya and Terregra is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Wijaya Karya Bangunan and Terregra Asia Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terregra Asia Energy 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 Terregra Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terregra Asia Energy has no effect on the direction of Wijaya Karya i.e., Wijaya Karya and Terregra Asia go up and down completely randomly.

Pair Corralation between Wijaya Karya and Terregra Asia

Assuming the 90 days trading horizon Wijaya Karya Bangunan is expected to under-perform the Terregra Asia. But the stock apears to be less risky and, when comparing its historical volatility, Wijaya Karya Bangunan is 1.4 times less risky than Terregra Asia. The stock trades about -0.05 of its potential returns per unit of risk. The Terregra Asia Energy is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  5,000  in Terregra Asia Energy on October 25, 2024 and sell it today you would lose (300.00) from holding Terregra Asia Energy or give up 6.0% of portfolio value over 90 days.

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

Wijaya Karya Bangunan  vs.  Terregra Asia Energy

Wijaya Karya Bangunan

Risk-Adjusted Performance

0 of 100

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 weak performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Terregra Asia Energy

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Terregra Asia Energy are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Terregra Asia disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wijaya Karya and Terregra Asia

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

The idea behind Wijaya Karya Bangunan and Terregra Asia Energy 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.