Correlation Between Kabelindo Murni and Vale Indonesia

Can any of the company-specific risk be diversified away by investing in both Kabelindo Murni and Vale Indonesia 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 Kabelindo Murni and Vale Indonesia into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Kabelindo Murni and Vale Indonesia

0.13

Correlation Coefficient

Kabelindo Murni  Vale Indonesia

Average diversification

The 3 months correlation between Kabelindo and Vale is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Kabelindo Murni Tbk and Vale Indonesia Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale Indonesia Tbk and Kabelindo Murni 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 Kabelindo Murni Tbk are associated (or correlated) with Vale Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vale Indonesia Tbk has no effect on the direction of Kabelindo Murni i.e., Kabelindo Murni and Vale Indonesia go up and down completely randomly.

Pair Corralation between Kabelindo Murni and Vale Indonesia

Assuming the 90 days trading horizon Kabelindo Murni Tbk is expected to under-perform the Vale Indonesia. But the stock apears to be less risky and, when comparing its historical volatility, Kabelindo Murni Tbk is 1.02 times less risky than Vale Indonesia. The stock trades about -0.16 of its potential returns per unit of risk. The Vale Indonesia Tbk is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  381,000  in Vale Indonesia Tbk on September 15, 2024 and sell it today you would earn a total of  14,000  from holding Vale Indonesia Tbk or generate 3.67% return on investment over 90 days.

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

Kabelindo Murni Tbk  vs.  Vale Indonesia Tbk

Kabelindo Murni Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kabelindo Murni Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Vale Indonesia Tbk

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vale Indonesia Tbk are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Vale Indonesia may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Kabelindo Murni and Vale Indonesia

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

The idea behind Kabelindo Murni Tbk and Vale Indonesia 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.