Correlation Between Kino Indonesia and Provident Agro

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

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

Diversification Opportunities for Kino Indonesia and Provident Agro

0.7

Correlation Coefficient

Kino Indonesia  Provident Agro

Poor diversification

The 3 months correlation between Kino and Provident is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Kino Indonesia Tbk and Provident Agro Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Provident Agro Tbk and Kino Indonesia 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 Kino Indonesia Tbk are associated (or correlated) with Provident Agro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Provident Agro Tbk has no effect on the direction of Kino Indonesia i.e., Kino Indonesia and Provident Agro go up and down completely randomly.

Pair Corralation between Kino Indonesia and Provident Agro

Assuming the 90 days trading horizon Kino Indonesia Tbk is expected to under-perform the Provident Agro. But the stock apears to be less risky and, when comparing its historical volatility, Kino Indonesia Tbk is 4.42 times less risky than Provident Agro. The stock trades about -0.16 of its potential returns per unit of risk. The Provident Agro Tbk is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  39,600  in Provident Agro Tbk on September 22, 2024 and sell it today you would earn a total of  1,400  from holding Provident Agro Tbk or generate 3.54% return on investment over 90 days.

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

Kino Indonesia Tbk  vs.  Provident Agro Tbk

Kino Indonesia Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kino Indonesia 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.

Provident Agro Tbk

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Provident Agro Tbk are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Provident Agro 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 Kino Indonesia and Provident Agro

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

The idea behind Kino Indonesia Tbk and Provident Agro 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.