Correlation Between Kedawung Setia and Steel Pipe

Can any of the company-specific risk be diversified away by investing in both Kedawung Setia 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 Kedawung Setia and Steel Pipe into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kedawung Setia Industrial and Steel Pipe Industry, you can compare the effects of market volatilities on Kedawung Setia 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 Kedawung Setia with a short position of Steel Pipe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kedawung Setia and Steel Pipe.

Diversification Opportunities for Kedawung Setia and Steel Pipe

-0.06

Correlation Coefficient

Kedawung Setia  Steel Pipe

Good diversification

The 3 months correlation between Kedawung and Steel is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Kedawung Setia Industrial 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 Kedawung Setia 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 Kedawung Setia Industrial 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 Kedawung Setia i.e., Kedawung Setia and Steel Pipe go up and down completely randomly.

Pair Corralation between Kedawung Setia and Steel Pipe

Assuming the 90 days trading horizon Kedawung Setia Industrial is expected to generate 3.0 times more return on investment than Steel Pipe. However, Kedawung Setia is 3.0 times more volatile than Steel Pipe Industry. It trades about 0.07 of its potential returns per unit of risk. Steel Pipe Industry is currently generating about -0.11 per unit of risk. If you would invest  37,500  in Kedawung Setia Industrial on September 5, 2024 and sell it today you would earn a total of  4,300  from holding Kedawung Setia Industrial or generate 11.47% return on investment over 90 days.

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

Kedawung Setia Industrial  vs.  Steel Pipe Industry

Kedawung Setia Industrial

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kedawung Setia Industrial are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Kedawung Setia disclosed solid returns over the last few months and may actually be approaching a breakup point.

Steel Pipe Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Steel Pipe Industry 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.

Pair Trading with Kedawung Setia and Steel Pipe

The main advantage of trading using opposite Kedawung Setia and Steel Pipe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kedawung Setia 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.

The idea behind Kedawung Setia Industrial and Steel Pipe Industry 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.