Correlation Between Equity Development and Krakatau Steel
Can any of the company-specific risk be diversified away by investing in both Equity Development 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 Equity Development and Krakatau Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equity Development Investment and Krakatau Steel Persero, you can compare the effects of market volatilities on Equity Development 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 Equity Development with a short position of Krakatau Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity Development and Krakatau Steel.
Diversification Opportunities for Equity Development and Krakatau Steel
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Equity and Krakatau is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Equity Development Investment 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 Equity Development 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 Equity Development Investment 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 Equity Development i.e., Equity Development and Krakatau Steel go up and down completely randomly.
Pair Corralation between Equity Development and Krakatau Steel
Assuming the 90 days trading horizon Equity Development Investment is expected to generate 0.61 times more return on investment than Krakatau Steel. However, Equity Development Investment is 1.64 times less risky than Krakatau Steel. It trades about 0.05 of its potential returns per unit of risk. Krakatau Steel Persero is currently generating about 0.03 per unit of risk. If you would invest 5,000 in Equity Development Investment on August 29, 2024 and sell it today you would earn a total of 700.00 from holding Equity Development Investment or generate 14.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Equity Development Investment vs. Krakatau Steel Persero
Performance |
| Timeline |
| Equity Development |
| Krakatau Steel Persero |
Equity Development and Krakatau Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equity Development and Krakatau Steel
The main advantage of trading using opposite Equity Development and Krakatau Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity Development 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.| Equity Development vs. Pacific Strategic Financial | Equity Development vs. Asuransi Harta Aman | Equity Development vs. Buana Finance Tbk | Equity Development vs. Asuransi Bintang Tbk |
| Krakatau Steel vs. Timah Persero Tbk | Krakatau Steel vs. Garuda Indonesia Persero | Krakatau Steel vs. Jasa Marga Tbk | Krakatau Steel vs. Semen Indonesia Persero |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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