Correlation Between PT Kusuma and Obm Drilchem

Can any of the company-specific risk be diversified away by investing in both PT Kusuma and Obm Drilchem 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 PT Kusuma and Obm Drilchem into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PT Kusuma Kemindo and Obm Drilchem PT, you can compare the effects of market volatilities on PT Kusuma and Obm Drilchem 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 PT Kusuma with a short position of Obm Drilchem. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Kusuma and Obm Drilchem.

Diversification Opportunities for PT Kusuma and Obm Drilchem

0.64

Correlation Coefficient

PT Kusuma  Obm Drilchem

Poor diversification

The 3 months correlation between KKES and Obm is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding PT Kusuma Kemindo and Obm Drilchem PT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Obm Drilchem PT and PT Kusuma 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 PT Kusuma Kemindo are associated (or correlated) with Obm Drilchem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Obm Drilchem PT has no effect on the direction of PT Kusuma i.e., PT Kusuma and Obm Drilchem go up and down completely randomly.

Pair Corralation between PT Kusuma and Obm Drilchem

Assuming the 90 days trading horizon PT Kusuma Kemindo is expected to generate 1.68 times more return on investment than Obm Drilchem. However, PT Kusuma is 1.68 times more volatile than Obm Drilchem PT. It trades about 0.13 of its potential returns per unit of risk. Obm Drilchem PT is currently generating about -0.04 per unit of risk. If you would invest  1,750  in PT Kusuma Kemindo on September 15, 2024 and sell it today you would earn a total of  1,250  from holding PT Kusuma Kemindo or generate 71.43% return on investment over 90 days.

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

PT Kusuma Kemindo  vs.  Obm Drilchem PT

PT Kusuma Kemindo

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PT Kusuma Kemindo are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, PT Kusuma is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Obm Drilchem PT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Obm Drilchem PT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Obm Drilchem 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 PT Kusuma and Obm Drilchem

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

The idea behind PT Kusuma Kemindo and Obm Drilchem PT 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.