Correlation Between DATANG INTL and PT Indosat

Can any of the company-specific risk be diversified away by investing in both DATANG INTL and PT Indosat 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 DATANG INTL and PT Indosat into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between DATANG INTL POW and PT Indosat Tbk, you can compare the effects of market volatilities on DATANG INTL and PT Indosat 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 DATANG INTL with a short position of PT Indosat. Check out your portfolio center. Please also check ongoing floating volatility patterns of DATANG INTL and PT Indosat.

Diversification Opportunities for DATANG INTL and PT Indosat

-0.02

Correlation Coefficient

DATANG INTL  PT Indosat

Good diversification

The 3 months correlation between DATANG and IDO1 is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding DATANG INTL POW and PT Indosat Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Indosat Tbk and DATANG INTL 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 DATANG INTL POW are associated (or correlated) with PT Indosat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Indosat Tbk has no effect on the direction of DATANG INTL i.e., DATANG INTL and PT Indosat go up and down completely randomly.

Pair Corralation between DATANG INTL and PT Indosat

Assuming the 90 days trading horizon DATANG INTL POW is expected to generate 0.73 times more return on investment than PT Indosat. However, DATANG INTL POW is 1.37 times less risky than PT Indosat. It trades about 0.04 of its potential returns per unit of risk. PT Indosat Tbk is currently generating about 0.0 per unit of risk. If you would invest  11.00  in DATANG INTL POW on September 20, 2024 and sell it today you would earn a total of  7.00  from holding DATANG INTL POW or generate 63.64% return on investment over 90 days.

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

DATANG INTL POW  vs.  PT Indosat Tbk

DATANG INTL POW

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DATANG INTL POW are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, DATANG INTL unveiled solid returns over the last few months and may actually be approaching a breakup point.

PT Indosat Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Indosat Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PT Indosat is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with DATANG INTL and PT Indosat

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

The idea behind DATANG INTL POW and PT Indosat 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.

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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 Transaction History module to view history of all your transactions and understand their impact on performance.