Correlation Between Vale Indonesia and Kapuas Prima
Can any of the company-specific risk be diversified away by investing in both Vale Indonesia and Kapuas Prima 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 Kapuas Prima 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 Kapuas Prima Coal, you can compare the effects of market volatilities on Vale Indonesia and Kapuas Prima 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 Kapuas Prima. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale Indonesia and Kapuas Prima.
Diversification Opportunities for Vale Indonesia and Kapuas Prima
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Vale and Kapuas is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Vale Indonesia Tbk and Kapuas Prima Coal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kapuas Prima Coal 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 Kapuas Prima. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kapuas Prima Coal has no effect on the direction of Vale Indonesia i.e., Vale Indonesia and Kapuas Prima go up and down completely randomly.
Pair Corralation between Vale Indonesia and Kapuas Prima
Assuming the 90 days trading horizon Vale Indonesia Tbk is expected to generate 0.45 times more return on investment than Kapuas Prima. However, Vale Indonesia Tbk is 2.23 times less risky than Kapuas Prima. It trades about -0.2 of its potential returns per unit of risk. Kapuas Prima Coal is currently generating about -0.16 per unit of risk. If you would invest 387,000 in Vale Indonesia Tbk on August 31, 2024 and sell it today you would lose (25,000) from holding Vale Indonesia Tbk or give up 6.46% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vale Indonesia Tbk vs. Kapuas Prima Coal
Performance |
| Timeline |
| Vale Indonesia Tbk |
| Kapuas Prima Coal |
Vale Indonesia and Kapuas Prima Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vale Indonesia and Kapuas Prima
The main advantage of trading using opposite Vale Indonesia and Kapuas Prima positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vale Indonesia position performs unexpectedly, Kapuas Prima 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 Kapuas Prima will offset losses from the drop in Kapuas Prima's long position.| Vale Indonesia vs. Timah Persero Tbk | Vale Indonesia vs. Aneka Tambang Persero | Vale Indonesia vs. Bukit Asam Tbk | Vale Indonesia vs. Perusahaan Gas Negara |
| Kapuas Prima vs. Perusahaan Gas Negara | Kapuas Prima vs. Vale Indonesia Tbk | Kapuas Prima vs. Telkom Indonesia Tbk | Kapuas Prima 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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