Correlation Between Steel Pipe and Pabrik Kertas
Can any of the company-specific risk be diversified away by investing in both Steel Pipe and Pabrik Kertas 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 Pabrik Kertas 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 Pabrik Kertas Tjiwi, you can compare the effects of market volatilities on Steel Pipe and Pabrik Kertas 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 Pabrik Kertas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Pipe and Pabrik Kertas.
Diversification Opportunities for Steel Pipe and Pabrik Kertas
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Steel and Pabrik is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Steel Pipe Industry and Pabrik Kertas Tjiwi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pabrik Kertas Tjiwi 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 Pabrik Kertas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pabrik Kertas Tjiwi has no effect on the direction of Steel Pipe i.e., Steel Pipe and Pabrik Kertas go up and down completely randomly.
Pair Corralation between Steel Pipe and Pabrik Kertas
Assuming the 90 days trading horizon Steel Pipe Industry is expected to generate 0.68 times more return on investment than Pabrik Kertas. However, Steel Pipe Industry is 1.47 times less risky than Pabrik Kertas. It trades about 0.03 of its potential returns per unit of risk. Pabrik Kertas Tjiwi is currently generating about -0.01 per unit of risk. If you would invest 24,534 in Steel Pipe Industry on August 27, 2024 and sell it today you would earn a total of 3,666 from holding Steel Pipe Industry or generate 14.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.79% |
| Values | Daily Returns |
Steel Pipe Industry vs. Pabrik Kertas Tjiwi
Performance |
| Timeline |
| Steel Pipe Industry |
| Pabrik Kertas Tjiwi |
Steel Pipe and Pabrik Kertas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Pipe and Pabrik Kertas
The main advantage of trading using opposite Steel Pipe and Pabrik Kertas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Pipe position performs unexpectedly, Pabrik Kertas 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 Pabrik Kertas will offset losses from the drop in Pabrik Kertas' long position.| Steel Pipe vs. Semen Baturaja Persero | Steel Pipe vs. Bekasi Fajar Industrial | Steel Pipe vs. Krakatau Steel Persero | Steel Pipe vs. Saranacentral Bajatama Tbk |
| Pabrik Kertas vs. Indah Kiat Pulp | Pabrik Kertas vs. Indocement Tunggal Prakarsa | Pabrik Kertas vs. Barito Pacific Tbk | Pabrik Kertas vs. Charoen Pokphand 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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