Correlation Between Semen Indonesia and Kedaung Indah

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

By analyzing existing cross correlation between Semen Indonesia Persero and Kedaung Indah Can, you can compare the effects of market volatilities on Semen Indonesia and Kedaung Indah 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 Semen Indonesia with a short position of Kedaung Indah. Check out your portfolio center. Please also check ongoing floating volatility patterns of Semen Indonesia and Kedaung Indah.

Diversification Opportunities for Semen Indonesia and Kedaung Indah

0.71

Correlation Coefficient

Semen Indonesia  Kedaung Indah

Poor diversification

The 3 months correlation between Semen and Kedaung is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Semen Indonesia Persero and Kedaung Indah Can in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kedaung Indah Can and Semen 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 Semen Indonesia Persero are associated (or correlated) with Kedaung Indah. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kedaung Indah Can has no effect on the direction of Semen Indonesia i.e., Semen Indonesia and Kedaung Indah go up and down completely randomly.

Pair Corralation between Semen Indonesia and Kedaung Indah

Assuming the 90 days trading horizon Semen Indonesia Persero is expected to under-perform the Kedaung Indah. But the stock apears to be less risky and, when comparing its historical volatility, Semen Indonesia Persero is 1.17 times less risky than Kedaung Indah. The stock trades about -0.09 of its potential returns per unit of risk. The Kedaung Indah Can is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  15,100  in Kedaung Indah Can on September 14, 2024 and sell it today you would lose (1,600) from holding Kedaung Indah Can or give up 10.6% of portfolio value over 90 days.

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

Semen Indonesia Persero  vs.  Kedaung Indah Can

Semen Indonesia Persero

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Semen Indonesia Persero 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.

Kedaung Indah Can

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kedaung Indah Can 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.

Pair Trading with Semen Indonesia and Kedaung Indah

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

The idea behind Semen Indonesia Persero and Kedaung Indah Can 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.