Correlation Between Indosterling Technomedia and Kawasan Industri

Can any of the company-specific risk be diversified away by investing in both Indosterling Technomedia and Kawasan Industri 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 Indosterling Technomedia and Kawasan Industri into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Indosterling Technomedia Tbk and Kawasan Industri Jababeka, you can compare the effects of market volatilities on Indosterling Technomedia and Kawasan Industri 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 Indosterling Technomedia with a short position of Kawasan Industri. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indosterling Technomedia and Kawasan Industri.

Diversification Opportunities for Indosterling Technomedia and Kawasan Industri

0.0

Correlation Coefficient

Indosterling Technomedia  Kawasan Industri

Pay attention - limited upside

The 3 months correlation between Indosterling and Kawasan is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Indosterling Technomedia Tbk and Kawasan Industri Jababeka in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kawasan Industri Jababeka and Indosterling Technomedia 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 Indosterling Technomedia Tbk are associated (or correlated) with Kawasan Industri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kawasan Industri Jababeka has no effect on the direction of Indosterling Technomedia i.e., Indosterling Technomedia and Kawasan Industri go up and down completely randomly.

Pair Corralation between Indosterling Technomedia and Kawasan Industri

If you would invest  17,900  in Kawasan Industri Jababeka on September 13, 2024 and sell it today you would earn a total of  1,700  from holding Kawasan Industri Jababeka or generate 9.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Indosterling Technomedia Tbk  vs.  Kawasan Industri Jababeka

Indosterling Technomedia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indosterling Technomedia Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Indosterling Technomedia is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Kawasan Industri Jababeka

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kawasan Industri Jababeka are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Kawasan Industri may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Indosterling Technomedia and Kawasan Industri

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

The idea behind Indosterling Technomedia Tbk and Kawasan Industri Jababeka 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.