Correlation Between Wijaya Karya and Steel Pipe
Can any of the company-specific risk be diversified away by investing in both Wijaya Karya and Steel Pipe 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 Wijaya Karya and Steel Pipe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wijaya Karya Bangunan and Steel Pipe Industry, you can compare the effects of market volatilities on Wijaya Karya and Steel Pipe 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 Wijaya Karya with a short position of Steel Pipe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wijaya Karya and Steel Pipe.
Diversification Opportunities for Wijaya Karya and Steel Pipe
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Wijaya and Steel is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Wijaya Karya Bangunan and Steel Pipe Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steel Pipe Industry and Wijaya Karya 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 Wijaya Karya Bangunan are associated (or correlated) with Steel Pipe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steel Pipe Industry has no effect on the direction of Wijaya Karya i.e., Wijaya Karya and Steel Pipe go up and down completely randomly.
Pair Corralation between Wijaya Karya and Steel Pipe
Assuming the 90 days trading horizon Wijaya Karya Bangunan is expected to under-perform the Steel Pipe. In addition to that, Wijaya Karya is 2.09 times more volatile than Steel Pipe Industry. It trades about -0.29 of its total potential returns per unit of risk. Steel Pipe Industry is currently generating about -0.37 per unit of volatility. If you would invest 30,200 in Steel Pipe Industry on September 1, 2024 and sell it today you would lose (1,800) from holding Steel Pipe Industry or give up 5.96% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wijaya Karya Bangunan vs. Steel Pipe Industry
Performance |
| Timeline |
| Wijaya Karya Bangunan |
| Steel Pipe Industry |
Wijaya Karya and Steel Pipe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wijaya Karya and Steel Pipe
The main advantage of trading using opposite Wijaya Karya and Steel Pipe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wijaya Karya position performs unexpectedly, Steel Pipe 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 Steel Pipe will offset losses from the drop in Steel Pipe's long position.| Wijaya Karya vs. Wijaya Karya Beton | Wijaya Karya vs. Waskita Beton Precast | Wijaya Karya vs. Pembangunan Perumahan PT | Wijaya Karya vs. Puradelta Lestari PT |
| Steel Pipe vs. Perusahaan Gas Negara | Steel Pipe vs. Vale Indonesia Tbk | Steel Pipe vs. Telkom Indonesia Tbk | Steel Pipe 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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