Correlation Between Emdeki Utama and Kencana Energi
Can any of the company-specific risk be diversified away by investing in both Emdeki Utama and Kencana Energi 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 Emdeki Utama and Kencana Energi into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emdeki Utama Tbk and Kencana Energi Lestari, you can compare the effects of market volatilities on Emdeki Utama and Kencana Energi 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 Emdeki Utama with a short position of Kencana Energi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emdeki Utama and Kencana Energi.
Diversification Opportunities for Emdeki Utama and Kencana Energi
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Emdeki and Kencana is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Emdeki Utama Tbk and Kencana Energi Lestari in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kencana Energi Lestari and Emdeki Utama 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 Emdeki Utama Tbk are associated (or correlated) with Kencana Energi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kencana Energi Lestari has no effect on the direction of Emdeki Utama i.e., Emdeki Utama and Kencana Energi go up and down completely randomly.
Pair Corralation between Emdeki Utama and Kencana Energi
Assuming the 90 days trading horizon Emdeki Utama Tbk is expected to under-perform the Kencana Energi. But the stock apears to be less risky and, when comparing its historical volatility, Emdeki Utama Tbk is 2.97 times less risky than Kencana Energi. The stock trades about -0.04 of its potential returns per unit of risk. The Kencana Energi Lestari is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 73,691 in Kencana Energi Lestari on September 12, 2024 and sell it today you would lose (9,691) from holding Kencana Energi Lestari or give up 13.15% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Emdeki Utama Tbk vs. Kencana Energi Lestari
Performance |
| Timeline |
| Emdeki Utama Tbk |
| Kencana Energi Lestari |
Emdeki Utama and Kencana Energi Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emdeki Utama and Kencana Energi
The main advantage of trading using opposite Emdeki Utama and Kencana Energi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emdeki Utama position performs unexpectedly, Kencana Energi 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 Kencana Energi will offset losses from the drop in Kencana Energi's long position.| Emdeki Utama vs. Panca Budi Idaman | Emdeki Utama vs. Intanwijaya Internasional Tbk | Emdeki Utama vs. Hartadinata Abadi Tbk | Emdeki Utama vs. Unggul Indah Cahaya |
| Kencana Energi vs. PT Indonesia Kendaraan | Kencana Energi vs. Cikarang Listrindo Tbk | Kencana Energi vs. Jasa Armada Indonesia | Kencana Energi vs. Pelita Samudera Shipping |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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