Correlation Between Kalbe Farma and Solusi Bangun

Can any of the company-specific risk be diversified away by investing in both Kalbe Farma and Solusi Bangun 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 Kalbe Farma and Solusi Bangun into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Kalbe Farma and Solusi Bangun

-0.47

Correlation Coefficient

Kalbe Farma  Solusi Bangun

Very good diversification

The 3 months correlation between Kalbe and Solusi is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Kalbe Farma Tbk and Solusi Bangun Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solusi Bangun Indonesia and Kalbe Farma 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 Kalbe Farma Tbk are associated (or correlated) with Solusi Bangun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solusi Bangun Indonesia has no effect on the direction of Kalbe Farma i.e., Kalbe Farma and Solusi Bangun go up and down completely randomly.

Pair Corralation between Kalbe Farma and Solusi Bangun

Assuming the 90 days trading horizon Kalbe Farma Tbk is expected to under-perform the Solusi Bangun. But the stock apears to be less risky and, when comparing its historical volatility, Kalbe Farma Tbk is 1.18 times less risky than Solusi Bangun. The stock trades about -0.17 of its potential returns per unit of risk. The Solusi Bangun Indonesia is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  75,000  in Solusi Bangun Indonesia on September 16, 2024 and sell it today you would earn a total of  3,000  from holding Solusi Bangun Indonesia or generate 4.0% return on investment over 90 days.

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

Kalbe Farma Tbk  vs.  Solusi Bangun Indonesia

Kalbe Farma Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kalbe Farma Tbk 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.

Solusi Bangun Indonesia

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Solusi Bangun Indonesia are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Solusi Bangun 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 Kalbe Farma and Solusi Bangun

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

The idea behind Kalbe Farma Tbk and Solusi Bangun Indonesia 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.