Correlation Between Kencana Energi and Pelayaran Nelly

Can any of the company-specific risk be diversified away by investing in both Kencana Energi and Pelayaran Nelly 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 Kencana Energi and Pelayaran Nelly into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kencana Energi Lestari and Pelayaran Nelly Dwi, you can compare the effects of market volatilities on Kencana Energi and Pelayaran Nelly 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 Kencana Energi with a short position of Pelayaran Nelly. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kencana Energi and Pelayaran Nelly.

Diversification Opportunities for Kencana Energi and Pelayaran Nelly

0.2

Correlation Coefficient

Kencana Energi  Pelayaran Nelly

Modest diversification

The 3 months correlation between Kencana and Pelayaran is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Kencana Energi Lestari and Pelayaran Nelly Dwi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pelayaran Nelly Dwi and Kencana Energi 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 Kencana Energi Lestari are associated (or correlated) with Pelayaran Nelly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pelayaran Nelly Dwi has no effect on the direction of Kencana Energi i.e., Kencana Energi and Pelayaran Nelly go up and down completely randomly.

Pair Corralation between Kencana Energi and Pelayaran Nelly

Assuming the 90 days trading horizon Kencana Energi Lestari is expected to under-perform the Pelayaran Nelly. In addition to that, Kencana Energi is 1.26 times more volatile than Pelayaran Nelly Dwi. It trades about -0.18 of its total potential returns per unit of risk. Pelayaran Nelly Dwi is currently generating about -0.05 per unit of volatility. If you would invest  46,600  in Pelayaran Nelly Dwi on September 19, 2024 and sell it today you would lose (1,600) from holding Pelayaran Nelly Dwi or give up 3.43% of portfolio value over 90 days.

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

Kencana Energi Lestari  vs.  Pelayaran Nelly Dwi

Kencana Energi Lestari

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kencana Energi Lestari 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.

Pelayaran Nelly Dwi

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Kencana Energi and Pelayaran Nelly

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

The idea behind Kencana Energi Lestari and Pelayaran Nelly Dwi 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.