Correlation Between Indo Kordsa and Sepatu Bata

Can any of the company-specific risk be diversified away by investing in both Indo Kordsa and Sepatu Bata 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 Indo Kordsa and Sepatu Bata into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Indo Kordsa Tbk and Sepatu Bata Tbk, you can compare the effects of market volatilities on Indo Kordsa and Sepatu Bata 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 Indo Kordsa with a short position of Sepatu Bata. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indo Kordsa and Sepatu Bata.

Diversification Opportunities for Indo Kordsa and Sepatu Bata

-0.68

Correlation Coefficient

Indo Kordsa  Sepatu Bata

Excellent diversification

The 3 months correlation between Indo and Sepatu is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Indo Kordsa Tbk and Sepatu Bata Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sepatu Bata Tbk and Indo Kordsa 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 Indo Kordsa Tbk are associated (or correlated) with Sepatu Bata. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sepatu Bata Tbk has no effect on the direction of Indo Kordsa i.e., Indo Kordsa and Sepatu Bata go up and down completely randomly.

Pair Corralation between Indo Kordsa and Sepatu Bata

Assuming the 90 days trading horizon Indo Kordsa Tbk is expected to generate 1.43 times more return on investment than Sepatu Bata. However, Indo Kordsa is 1.43 times more volatile than Sepatu Bata Tbk. It trades about 0.04 of its potential returns per unit of risk. Sepatu Bata Tbk is currently generating about -0.17 per unit of risk. If you would invest  574,269  in Indo Kordsa Tbk on September 16, 2024 and sell it today you would earn a total of  25,731  from holding Indo Kordsa Tbk or generate 4.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Indo Kordsa Tbk  vs.  Sepatu Bata Tbk

Indo Kordsa Tbk

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Indo Kordsa Tbk are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Indo Kordsa is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Sepatu Bata Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sepatu Bata Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Indo Kordsa and Sepatu Bata

The main advantage of trading using opposite Indo Kordsa and Sepatu Bata positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indo Kordsa position performs unexpectedly, Sepatu Bata 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 Sepatu Bata will offset losses from the drop in Sepatu Bata's long position.

The idea behind Indo Kordsa Tbk and Sepatu Bata Tbk 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.