Correlation Between Wijaya Karya and Pakuwon Jati

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

By analyzing existing cross correlation between Wijaya Karya Beton and Pakuwon Jati Tbk, you can compare the effects of market volatilities on Wijaya Karya and Pakuwon Jati 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 Pakuwon Jati. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wijaya Karya and Pakuwon Jati.

Diversification Opportunities for Wijaya Karya and Pakuwon Jati

0.75

Correlation Coefficient

Wijaya Karya  Pakuwon Jati

Poor diversification

The 3 months correlation between Wijaya and Pakuwon is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Wijaya Karya Beton and Pakuwon Jati Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakuwon Jati Tbk 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 Beton are associated (or correlated) with Pakuwon Jati. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakuwon Jati Tbk has no effect on the direction of Wijaya Karya i.e., Wijaya Karya and Pakuwon Jati go up and down completely randomly.

Pair Corralation between Wijaya Karya and Pakuwon Jati

Assuming the 90 days trading horizon Wijaya Karya Beton is expected to under-perform the Pakuwon Jati. In addition to that, Wijaya Karya is 1.74 times more volatile than Pakuwon Jati Tbk. It trades about -0.19 of its total potential returns per unit of risk. Pakuwon Jati Tbk is currently generating about -0.11 per unit of volatility. If you would invest  48,400  in Pakuwon Jati Tbk on September 3, 2024 and sell it today you would lose (6,600) from holding Pakuwon Jati Tbk or give up 13.64% of portfolio value over 90 days.

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

Wijaya Karya Beton  vs.  Pakuwon Jati Tbk

Wijaya Karya Beton

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wijaya Karya Beton 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 January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pakuwon Jati Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pakuwon Jati 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 January 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 Pakuwon Jati

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

The idea behind Wijaya Karya Beton and Pakuwon Jati 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.