Correlation Between Steel Pipe and Kedaung Indah
Can any of the company-specific risk be diversified away by investing in both Steel Pipe 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 Steel Pipe and Kedaung Indah into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Pipe Industry and Kedaung Indah Can, you can compare the effects of market volatilities on Steel Pipe 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 Steel Pipe with a short position of Kedaung Indah. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Pipe and Kedaung Indah.
Diversification Opportunities for Steel Pipe and Kedaung Indah
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Steel and Kedaung is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Steel Pipe Industry 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 Steel Pipe 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 Steel Pipe Industry 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 Steel Pipe i.e., Steel Pipe and Kedaung Indah go up and down completely randomly.
Pair Corralation between Steel Pipe and Kedaung Indah
Assuming the 90 days trading horizon Steel Pipe is expected to generate 8.18 times less return on investment than Kedaung Indah. But when comparing it to its historical volatility, Steel Pipe Industry is 5.12 times less risky than Kedaung Indah. It trades about 0.02 of its potential returns per unit of risk. Kedaung Indah Can is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 13,400 in Kedaung Indah Can on September 12, 2024 and sell it today you would earn a total of 400.00 from holding Kedaung Indah Can or generate 2.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Steel Pipe Industry vs. Kedaung Indah Can
Performance |
| Timeline |
| Steel Pipe Industry |
| Kedaung Indah Can |
Steel Pipe and Kedaung Indah Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Pipe and Kedaung Indah
The main advantage of trading using opposite Steel Pipe and Kedaung Indah positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Pipe 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.| Steel Pipe vs. Kedaung Indah Can | Steel Pipe vs. Kabelindo Murni Tbk | Steel Pipe vs. Champion Pacific Indonesia | Steel Pipe vs. Bhuwanatala Indah Permai |
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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