Correlation Between Tera Data and Indonesian Tobacco

Can any of the company-specific risk be diversified away by investing in both Tera Data and Indonesian Tobacco 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 Tera Data and Indonesian Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tera Data Indonusa and Indonesian Tobacco Tbk, you can compare the effects of market volatilities on Tera Data and Indonesian Tobacco 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 Tera Data with a short position of Indonesian Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tera Data and Indonesian Tobacco.

Diversification Opportunities for Tera Data and Indonesian Tobacco

-0.49

Correlation Coefficient

Tera Data  Indonesian Tobacco

Very good diversification

The 3 months correlation between Tera and Indonesian is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Tera Data Indonusa and Indonesian Tobacco Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indonesian Tobacco Tbk and Tera Data 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 Tera Data Indonusa are associated (or correlated) with Indonesian Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indonesian Tobacco Tbk has no effect on the direction of Tera Data i.e., Tera Data and Indonesian Tobacco go up and down completely randomly.

Pair Corralation between Tera Data and Indonesian Tobacco

Assuming the 90 days trading horizon Tera Data Indonusa is expected to generate 1.39 times more return on investment than Indonesian Tobacco. However, Tera Data is 1.39 times more volatile than Indonesian Tobacco Tbk. It trades about 0.13 of its potential returns per unit of risk. Indonesian Tobacco Tbk is currently generating about 0.03 per unit of risk. If you would invest  11,908  in Tera Data Indonusa on September 12, 2024 and sell it today you would earn a total of  2,092  from holding Tera Data Indonusa or generate 17.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Tera Data Indonusa  vs.  Indonesian Tobacco Tbk

Tera Data Indonusa

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tera Data Indonusa are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Tera Data disclosed solid returns over the last few months and may actually be approaching a breakup point.

Indonesian Tobacco Tbk

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Indonesian Tobacco Tbk are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Indonesian Tobacco 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 Tera Data and Indonesian Tobacco

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

The idea behind Tera Data Indonusa and Indonesian Tobacco 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.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.