Correlation Between Kawasan Industri and Rukun Raharja

Can any of the company-specific risk be diversified away by investing in both Kawasan Industri and Rukun Raharja 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 Kawasan Industri and Rukun Raharja into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kawasan Industri Jababeka and Rukun Raharja Tbk, you can compare the effects of market volatilities on Kawasan Industri and Rukun Raharja 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 Kawasan Industri with a short position of Rukun Raharja. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kawasan Industri and Rukun Raharja.

Diversification Opportunities for Kawasan Industri and Rukun Raharja

0.62

Correlation Coefficient

Kawasan Industri  Rukun Raharja

Poor diversification

The 3 months correlation between Kawasan and Rukun is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Kawasan Industri Jababeka and Rukun Raharja Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rukun Raharja Tbk and Kawasan Industri 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 Kawasan Industri Jababeka are associated (or correlated) with Rukun Raharja. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rukun Raharja Tbk has no effect on the direction of Kawasan Industri i.e., Kawasan Industri and Rukun Raharja go up and down completely randomly.

Pair Corralation between Kawasan Industri and Rukun Raharja

Assuming the 90 days trading horizon Kawasan Industri is expected to generate 3.84 times less return on investment than Rukun Raharja. But when comparing it to its historical volatility, Kawasan Industri Jababeka is 3.77 times less risky than Rukun Raharja. It trades about 0.19 of its potential returns per unit of risk. Rukun Raharja Tbk is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  122,500  in Rukun Raharja Tbk on September 5, 2024 and sell it today you would earn a total of  90,500  from holding Rukun Raharja Tbk or generate 73.88% return on investment over 90 days.

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

Kawasan Industri Jababeka  vs.  Rukun Raharja Tbk

Kawasan Industri Jababeka

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kawasan Industri Jababeka are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Kawasan Industri disclosed solid returns over the last few months and may actually be approaching a breakup point.

Rukun Raharja Tbk

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rukun Raharja Tbk are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Rukun Raharja disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kawasan Industri and Rukun Raharja

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

The idea behind Kawasan Industri Jababeka and Rukun Raharja 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 Global Correlations module to find global opportunities by holding instruments from different markets.