Correlation Between Pembangunan Jaya and Indo Kordsa

Can any of the company-specific risk be diversified away by investing in both Pembangunan Jaya and Indo Kordsa 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 Pembangunan Jaya and Indo Kordsa into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pembangunan Jaya Ancol and Indo Kordsa Tbk, you can compare the effects of market volatilities on Pembangunan Jaya and Indo Kordsa 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 Pembangunan Jaya with a short position of Indo Kordsa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pembangunan Jaya and Indo Kordsa.

Diversification Opportunities for Pembangunan Jaya and Indo Kordsa

-0.54

Correlation Coefficient

Pembangunan Jaya  Indo Kordsa

Excellent diversification

The 3 months correlation between Pembangunan and Indo is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Pembangunan Jaya Ancol and Indo Kordsa Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indo Kordsa Tbk and Pembangunan Jaya 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 Pembangunan Jaya Ancol are associated (or correlated) with Indo Kordsa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indo Kordsa Tbk has no effect on the direction of Pembangunan Jaya i.e., Pembangunan Jaya and Indo Kordsa go up and down completely randomly.

Pair Corralation between Pembangunan Jaya and Indo Kordsa

Assuming the 90 days trading horizon Pembangunan Jaya Ancol is expected to under-perform the Indo Kordsa. But the stock apears to be less risky and, when comparing its historical volatility, Pembangunan Jaya Ancol is 2.7 times less risky than Indo Kordsa. The stock trades about -0.16 of its potential returns per unit of risk. The Indo Kordsa Tbk is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  574,269  in Indo Kordsa Tbk on September 16, 2024 and sell it today you would earn a total of  25,731  from holding Indo Kordsa Tbk or generate 4.48% return on investment over 90 days.

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

Pembangunan Jaya Ancol  vs.  Indo Kordsa Tbk

Pembangunan Jaya Ancol

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pembangunan Jaya Ancol 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.

Indo Kordsa Tbk

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Indo Kordsa Tbk are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Indo Kordsa 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 Pembangunan Jaya and Indo Kordsa

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

The idea behind Pembangunan Jaya Ancol and Indo Kordsa 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.