Correlation Between Kapuas Prima and Cikarang Listrindo

Can any of the company-specific risk be diversified away by investing in both Kapuas Prima and Cikarang Listrindo 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 Kapuas Prima and Cikarang Listrindo into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kapuas Prima Coal and Cikarang Listrindo Tbk, you can compare the effects of market volatilities on Kapuas Prima and Cikarang Listrindo 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 Kapuas Prima with a short position of Cikarang Listrindo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kapuas Prima and Cikarang Listrindo.

Diversification Opportunities for Kapuas Prima and Cikarang Listrindo

0.42

Correlation Coefficient

Kapuas Prima  Cikarang Listrindo

Very weak diversification

The 3 months correlation between Kapuas and Cikarang is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Kapuas Prima Coal and Cikarang Listrindo Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cikarang Listrindo Tbk and Kapuas Prima 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 Kapuas Prima Coal are associated (or correlated) with Cikarang Listrindo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cikarang Listrindo Tbk has no effect on the direction of Kapuas Prima i.e., Kapuas Prima and Cikarang Listrindo go up and down completely randomly.

Pair Corralation between Kapuas Prima and Cikarang Listrindo

Assuming the 90 days trading horizon Kapuas Prima Coal is expected to under-perform the Cikarang Listrindo. In addition to that, Kapuas Prima is 3.7 times more volatile than Cikarang Listrindo Tbk. It trades about -0.05 of its total potential returns per unit of risk. Cikarang Listrindo Tbk is currently generating about 0.07 per unit of volatility. If you would invest  53,067  in Cikarang Listrindo Tbk on September 14, 2024 and sell it today you would earn a total of  16,933  from holding Cikarang Listrindo Tbk or generate 31.91% return on investment over 90 days.

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

Kapuas Prima Coal  vs.  Cikarang Listrindo Tbk

Kapuas Prima Coal

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kapuas Prima Coal are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Kapuas Prima disclosed solid returns over the last few months and may actually be approaching a breakup point.

Cikarang Listrindo Tbk

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cikarang Listrindo Tbk are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Cikarang Listrindo 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 Kapuas Prima and Cikarang Listrindo

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

The idea behind Kapuas Prima Coal and Cikarang Listrindo 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.