Correlation Between Kapuas Prima and Putra Rajawali

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Can any of the company-specific risk be diversified away by investing in both Kapuas Prima and Putra Rajawali 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 Kapuas Prima and Putra Rajawali into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kapuas Prima Coal and Putra Rajawali Kencana, you can compare the effects of market volatilities on Kapuas Prima and Putra Rajawali 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 Kapuas Prima with a short position of Putra Rajawali. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kapuas Prima and Putra Rajawali.

Diversification Opportunities for Kapuas Prima and Putra Rajawali

0.52
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Kapuas and Putra is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Kapuas Prima Coal and Putra Rajawali Kencana in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putra Rajawali Kencana and Kapuas Prima 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 Kapuas Prima Coal are associated (or correlated) with Putra Rajawali. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putra Rajawali Kencana has no effect on the direction of Kapuas Prima i.e., Kapuas Prima and Putra Rajawali go up and down completely randomly.

Pair Corralation between Kapuas Prima and Putra Rajawali

Assuming the 90 days trading horizon Kapuas Prima Coal is expected to under-perform the Putra Rajawali. But the stock apears to be less risky and, when comparing its historical volatility, Kapuas Prima Coal is 1.8 times less risky than Putra Rajawali. The stock trades about -0.38 of its potential returns per unit of risk. The Putra Rajawali Kencana is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  1,300  in Putra Rajawali Kencana on November 28, 2024 and sell it today you would lose (100.00) from holding Putra Rajawali Kencana or give up 7.69% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Kapuas Prima Coal  vs.  Putra Rajawali Kencana

 Performance 
       Timeline  
Kapuas Prima Coal 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Kapuas Prima Coal are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward-looking signals, Kapuas Prima disclosed solid returns over the last few months and may actually be approaching a breakup point.
Putra Rajawali Kencana 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Over the last 90 days Putra Rajawali Kencana has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Putra Rajawali is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Kapuas Prima and Putra Rajawali Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Kapuas Prima and Putra Rajawali

The main advantage of trading using opposite Kapuas Prima and Putra Rajawali positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kapuas Prima position performs unexpectedly, Putra Rajawali 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 Putra Rajawali will offset losses from the drop in Putra Rajawali's long position.
The idea behind Kapuas Prima Coal and Putra Rajawali Kencana pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.

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