Correlation Between Kedaung Indah and Alkindo Naratama

Can any of the company-specific risk be diversified away by investing in both Kedaung Indah and Alkindo Naratama 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 Kedaung Indah and Alkindo Naratama into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kedaung Indah Can and Alkindo Naratama Tbk, you can compare the effects of market volatilities on Kedaung Indah and Alkindo Naratama 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 Kedaung Indah with a short position of Alkindo Naratama. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kedaung Indah and Alkindo Naratama.

Diversification Opportunities for Kedaung Indah and Alkindo Naratama

-0.77

Correlation Coefficient

Kedaung Indah  Alkindo Naratama

Pay attention - limited upside

The 3 months correlation between Kedaung and Alkindo is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Kedaung Indah Can and Alkindo Naratama Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alkindo Naratama Tbk and Kedaung Indah 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 Kedaung Indah Can are associated (or correlated) with Alkindo Naratama. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alkindo Naratama Tbk has no effect on the direction of Kedaung Indah i.e., Kedaung Indah and Alkindo Naratama go up and down completely randomly.

Pair Corralation between Kedaung Indah and Alkindo Naratama

Assuming the 90 days trading horizon Kedaung Indah is expected to generate 41.89 times less return on investment than Alkindo Naratama. But when comparing it to its historical volatility, Kedaung Indah Can is 8.95 times less risky than Alkindo Naratama. It trades about 0.01 of its potential returns per unit of risk. Alkindo Naratama Tbk is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  40,257  in Alkindo Naratama Tbk on September 13, 2024 and sell it today you would earn a total of  13,743  from holding Alkindo Naratama Tbk or generate 34.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.79%
Values	Daily Returns

Kedaung Indah Can  vs.  Alkindo Naratama Tbk

Kedaung Indah Can

Risk-Adjusted Performance

0 of 100

Very Weak

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

Alkindo Naratama Tbk

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alkindo Naratama Tbk are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Alkindo Naratama disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kedaung Indah and Alkindo Naratama

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

The idea behind Kedaung Indah Can and Alkindo Naratama 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.