Correlation Between HK Metals and IDX 30

Can any of the company-specific risk be diversified away by investing in both HK Metals and IDX 30 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 HK Metals and IDX 30 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HK Metals Utama and IDX 30 Jakarta, you can compare the effects of market volatilities on HK Metals and IDX 30 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 HK Metals with a short position of IDX 30. Check out your portfolio center. Please also check ongoing floating volatility patterns of HK Metals and IDX 30.

Diversification Opportunities for HK Metals and IDX 30

0.0

Correlation Coefficient

HK Metals  IDX 30

Pay attention - limited upside

The 3 months correlation between HKMU and IDX is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding HK Metals Utama and IDX 30 Jakarta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDX 30 Jakarta and HK Metals 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 HK Metals Utama are associated (or correlated) with IDX 30. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDX 30 Jakarta has no effect on the direction of HK Metals i.e., HK Metals and IDX 30 go up and down completely randomly.

Pair Corralation between HK Metals and IDX 30

If you would invest  5,000  in HK Metals Utama on August 30, 2024 and sell it today you would earn a total of  0.00  from holding HK Metals Utama or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

HK Metals Utama  vs.  IDX 30 Jakarta

Pair Trading with HK Metals and IDX 30

The main advantage of trading using opposite HK Metals and IDX 30 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HK Metals position performs unexpectedly, IDX 30 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 IDX 30 will offset losses from the drop in IDX 30's long position.

The idea behind HK Metals Utama and IDX 30 Jakarta 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.