Correlation Between Kapuas Prima and Alfa Energi

Can any of the company-specific risk be diversified away by investing in both Kapuas Prima and Alfa Energi 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 Kapuas Prima and Alfa Energi into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kapuas Prima Coal and Alfa Energi Investama, you can compare the effects of market volatilities on Kapuas Prima and Alfa Energi 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 Kapuas Prima with a short position of Alfa Energi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kapuas Prima and Alfa Energi.

Diversification Opportunities for Kapuas Prima and Alfa Energi

-0.06

Correlation Coefficient

Kapuas Prima  Alfa Energi

Good diversification

The 3 months correlation between Kapuas and Alfa is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Kapuas Prima Coal and Alfa Energi Investama in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alfa Energi Investama and Kapuas Prima 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 Kapuas Prima Coal are associated (or correlated) with Alfa Energi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alfa Energi Investama has no effect on the direction of Kapuas Prima i.e., Kapuas Prima and Alfa Energi go up and down completely randomly.

Pair Corralation between Kapuas Prima and Alfa Energi

Assuming the 90 days trading horizon Kapuas Prima Coal is expected to generate 1.54 times more return on investment than Alfa Energi. However, Kapuas Prima is 1.54 times more volatile than Alfa Energi Investama. It trades about 0.07 of its potential returns per unit of risk. Alfa Energi Investama is currently generating about -0.12 per unit of risk. If you would invest  1,600  in Kapuas Prima Coal on September 12, 2024 and sell it today you would earn a total of  200.00  from holding Kapuas Prima Coal or generate 12.5% return on investment over 90 days.

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

Kapuas Prima Coal  vs.  Alfa Energi Investama

Kapuas Prima Coal

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kapuas Prima Coal are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Kapuas Prima disclosed solid returns over the last few months and may actually be approaching a breakup point.

Alfa Energi Investama

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alfa Energi Investama 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.

Pair Trading with Kapuas Prima and Alfa Energi

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

The idea behind Kapuas Prima Coal and Alfa Energi Investama 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.