Correlation Between Capital Financial and Krakatau Steel
Can any of the company-specific risk be diversified away by investing in both Capital Financial and Krakatau Steel 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 Krakatau Steel 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 Krakatau Steel Persero, you can compare the effects of market volatilities on Capital Financial and Krakatau Steel 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 Krakatau Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Financial and Krakatau Steel.
Diversification Opportunities for Capital Financial and Krakatau Steel
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Capital and Krakatau is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Capital Financial Indonesia and Krakatau Steel Persero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Krakatau Steel Persero 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 Krakatau Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Krakatau Steel Persero has no effect on the direction of Capital Financial i.e., Capital Financial and Krakatau Steel go up and down completely randomly.
Pair Corralation between Capital Financial and Krakatau Steel
Assuming the 90 days trading horizon Capital Financial Indonesia is expected to generate 0.72 times more return on investment than Krakatau Steel. However, Capital Financial Indonesia is 1.39 times less risky than Krakatau Steel. It trades about -0.15 of its potential returns per unit of risk. Krakatau Steel Persero is currently generating about -0.33 per unit of risk. If you would invest 54,500 in Capital Financial Indonesia on August 31, 2024 and sell it today you would lose (3,500) from holding Capital Financial Indonesia or give up 6.42% 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. Krakatau Steel Persero
Performance |
| Timeline |
| Capital Financial |
| Krakatau Steel Persero |
Capital Financial and Krakatau Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Financial and Krakatau Steel
The main advantage of trading using opposite Capital Financial and Krakatau Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Financial position performs unexpectedly, Krakatau Steel 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 Krakatau Steel will offset losses from the drop in Krakatau Steel's long position.| Capital Financial vs. Bank BRISyariah Tbk | Capital Financial vs. Ace Hardware Indonesia | Capital Financial vs. Merdeka Copper Gold | Capital Financial vs. Mitra Pinasthika Mustika |
| Krakatau Steel vs. Perusahaan Gas Negara | Krakatau Steel vs. Vale Indonesia Tbk | Krakatau Steel vs. Telkom Indonesia Tbk | Krakatau Steel vs. Mitra Pinasthika Mustika |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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