Correlation Between Kabelindo Murni and Weha Transportasi

Can any of the company-specific risk be diversified away by investing in both Kabelindo Murni and Weha Transportasi 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 Kabelindo Murni and Weha Transportasi into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Kabelindo Murni and Weha Transportasi

0.45

Correlation Coefficient

Kabelindo Murni  Weha Transportasi

Very weak diversification

The 3 months correlation between Kabelindo and Weha is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Kabelindo Murni Tbk and Weha Transportasi Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weha Transportasi and Kabelindo Murni 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 Kabelindo Murni Tbk are associated (or correlated) with Weha Transportasi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weha Transportasi has no effect on the direction of Kabelindo Murni i.e., Kabelindo Murni and Weha Transportasi go up and down completely randomly.

Pair Corralation between Kabelindo Murni and Weha Transportasi

Assuming the 90 days trading horizon Kabelindo Murni Tbk is expected to generate 1.17 times more return on investment than Weha Transportasi. However, Kabelindo Murni is 1.17 times more volatile than Weha Transportasi Indonesia. It trades about 0.19 of its potential returns per unit of risk. Weha Transportasi Indonesia is currently generating about -0.12 per unit of risk. If you would invest  24,200  in Kabelindo Murni Tbk on March 4, 2024 and sell it today you would earn a total of  1,200  from holding Kabelindo Murni Tbk or generate 4.96% return on investment over 90 days.

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

Kabelindo Murni Tbk  vs.  Weha Transportasi Indonesia

Kabelindo Murni Tbk

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kabelindo Murni Tbk are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Kabelindo Murni is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Weha Transportasi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Weha Transportasi Indonesia 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 basic indicators remain quite persistent which may send shares a bit higher in July 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Kabelindo Murni and Weha Transportasi

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

The idea behind Kabelindo Murni Tbk and Weha Transportasi 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..