Correlation Between Steel Pipe and J Resources
Can any of the company-specific risk be diversified away by investing in both Steel Pipe and J Resources 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 J Resources 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 J Resources Asia, you can compare the effects of market volatilities on Steel Pipe and J Resources 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 J Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Pipe and J Resources.
Diversification Opportunities for Steel Pipe and J Resources
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Steel and PSAB is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Steel Pipe Industry and J Resources Asia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on J Resources Asia 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 J Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of J Resources Asia has no effect on the direction of Steel Pipe i.e., Steel Pipe and J Resources go up and down completely randomly.
Pair Corralation between Steel Pipe and J Resources
Assuming the 90 days trading horizon Steel Pipe Industry is expected to under-perform the J Resources. But the stock apears to be less risky and, when comparing its historical volatility, Steel Pipe Industry is 3.56 times less risky than J Resources. The stock trades about -0.37 of its potential returns per unit of risk. The J Resources Asia is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest 32,000 in J Resources Asia on September 1, 2024 and sell it today you would lose (1,800) from holding J Resources Asia or give up 5.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Steel Pipe Industry vs. J Resources Asia
Performance |
| Timeline |
| Steel Pipe Industry |
| J Resources Asia |
Steel Pipe and J Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Pipe and J Resources
The main advantage of trading using opposite Steel Pipe and J Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Pipe position performs unexpectedly, J Resources 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 J Resources will offset losses from the drop in J Resources' long position.| Steel Pipe vs. Perusahaan Gas Negara | Steel Pipe vs. Vale Indonesia Tbk | Steel Pipe vs. Telkom Indonesia Tbk | Steel Pipe vs. Mitra Pinasthika Mustika |
| J Resources vs. Merdeka Copper Gold | J Resources vs. Golden Eagle Energy | J Resources vs. Rukun Raharja Tbk | J Resources vs. Wilton Makmur Indonesia |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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