Correlation Between Capital Financial and Vale Indonesia
Can any of the company-specific risk be diversified away by investing in both Capital Financial and Vale Indonesia 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 Capital Financial and Vale Indonesia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital Financial Indonesia and Vale Indonesia Tbk, you can compare the effects of market volatilities on Capital Financial and Vale Indonesia 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 Capital Financial with a short position of Vale Indonesia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Financial and Vale Indonesia.
Diversification Opportunities for Capital Financial and Vale Indonesia
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Capital and Vale is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Capital Financial Indonesia and Vale Indonesia Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale Indonesia Tbk and Capital Financial 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 Capital Financial Indonesia are associated (or correlated) with Vale Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vale Indonesia Tbk has no effect on the direction of Capital Financial i.e., Capital Financial and Vale Indonesia go up and down completely randomly.
Pair Corralation between Capital Financial and Vale Indonesia
Assuming the 90 days trading horizon Capital Financial Indonesia is expected to under-perform the Vale Indonesia. In addition to that, Capital Financial is 1.22 times more volatile than Vale Indonesia Tbk. It trades about -0.18 of its total potential returns per unit of risk. Vale Indonesia Tbk is currently generating about -0.16 per unit of volatility. If you would invest 380,000 in Vale Indonesia Tbk on September 2, 2024 and sell it today you would lose (20,000) from holding Vale Indonesia Tbk or give up 5.26% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital Financial Indonesia vs. Vale Indonesia Tbk
Performance |
| Timeline |
| Capital Financial |
| Vale Indonesia Tbk |
Capital Financial and Vale Indonesia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Financial and Vale Indonesia
The main advantage of trading using opposite Capital Financial and Vale Indonesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Financial position performs unexpectedly, Vale Indonesia 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 Vale Indonesia will offset losses from the drop in Vale Indonesia's long position.| Capital Financial vs. Ace Hardware Indonesia | Capital Financial vs. Merdeka Copper Gold | Capital Financial vs. Mitra Pinasthika Mustika | Capital Financial vs. Jakarta Int Hotels |
| Vale Indonesia vs. Perusahaan Gas Negara | Vale Indonesia vs. Telkom Indonesia Tbk | Vale Indonesia vs. Mitra Pinasthika Mustika | Vale Indonesia vs. Jakarta Int Hotels |
Check out your portfolio center.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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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