Correlation Between Vale Indonesia and Kedaung Indah
Can any of the company-specific risk be diversified away by investing in both Vale Indonesia and Kedaung Indah 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 Vale Indonesia and Kedaung Indah into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vale Indonesia Tbk and Kedaung Indah Can, you can compare the effects of market volatilities on Vale Indonesia and Kedaung Indah 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 Vale Indonesia with a short position of Kedaung Indah. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale Indonesia and Kedaung Indah.
Diversification Opportunities for Vale Indonesia and Kedaung Indah
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Vale and Kedaung is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Vale Indonesia Tbk and Kedaung Indah Can in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kedaung Indah Can and Vale Indonesia 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 Vale Indonesia Tbk are associated (or correlated) with Kedaung Indah. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kedaung Indah Can has no effect on the direction of Vale Indonesia i.e., Vale Indonesia and Kedaung Indah go up and down completely randomly.
Pair Corralation between Vale Indonesia and Kedaung Indah
Assuming the 90 days trading horizon Vale Indonesia Tbk is expected to generate 0.44 times more return on investment than Kedaung Indah. However, Vale Indonesia Tbk is 2.27 times less risky than Kedaung Indah. It trades about -0.17 of its potential returns per unit of risk. Kedaung Indah Can is currently generating about -0.15 per unit of risk. If you would invest 382,000 in Vale Indonesia Tbk on September 1, 2024 and sell it today you would lose (22,000) from holding Vale Indonesia Tbk or give up 5.76% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Vale Indonesia Tbk vs. Kedaung Indah Can
Performance |
| Timeline |
| Vale Indonesia Tbk |
| Kedaung Indah Can |
Vale Indonesia and Kedaung Indah Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vale Indonesia and Kedaung Indah
The main advantage of trading using opposite Vale Indonesia and Kedaung Indah positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vale Indonesia position performs unexpectedly, Kedaung Indah 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 Kedaung Indah will offset losses from the drop in Kedaung Indah's long position.| Vale Indonesia vs. Perusahaan Gas Negara | Vale Indonesia vs. Telkom Indonesia Tbk | Vale Indonesia vs. Mitra Pinasthika Mustika | Vale Indonesia vs. Jakarta Int Hotels |
| Kedaung Indah vs. Langgeng Makmur Industri | Kedaung Indah vs. Kedawung Setia Industrial | Kedaung Indah vs. Mustika Ratu Tbk | Kedaung Indah vs. Kabelindo Murni Tbk |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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