Correlation Between Indo Kordsa and Cita Mineral

Can any of the company-specific risk be diversified away by investing in both Indo Kordsa and Cita Mineral 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 Indo Kordsa and Cita Mineral into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Indo Kordsa Tbk and Cita Mineral Investindo, you can compare the effects of market volatilities on Indo Kordsa and Cita Mineral 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 Indo Kordsa with a short position of Cita Mineral. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indo Kordsa and Cita Mineral.

Diversification Opportunities for Indo Kordsa and Cita Mineral

0.76

Correlation Coefficient

Indo Kordsa  Cita Mineral

Poor diversification

The 3 months correlation between Indo and Cita is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Indo Kordsa Tbk and Cita Mineral Investindo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cita Mineral Investindo and Indo Kordsa 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 Indo Kordsa Tbk are associated (or correlated) with Cita Mineral. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cita Mineral Investindo has no effect on the direction of Indo Kordsa i.e., Indo Kordsa and Cita Mineral go up and down completely randomly.

Pair Corralation between Indo Kordsa and Cita Mineral

Assuming the 90 days trading horizon Indo Kordsa is expected to generate 6.34 times less return on investment than Cita Mineral. But when comparing it to its historical volatility, Indo Kordsa Tbk is 1.71 times less risky than Cita Mineral. It trades about 0.04 of its potential returns per unit of risk. Cita Mineral Investindo is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  251,000  in Cita Mineral Investindo on September 18, 2024 and sell it today you would earn a total of  99,000  from holding Cita Mineral Investindo or generate 39.44% return on investment over 90 days.

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

Indo Kordsa Tbk  vs.  Cita Mineral Investindo

Indo Kordsa Tbk

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Indo Kordsa Tbk are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Indo Kordsa is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Cita Mineral Investindo

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cita Mineral Investindo are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Cita Mineral disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Indo Kordsa and Cita Mineral

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

The idea behind Indo Kordsa Tbk and Cita Mineral Investindo 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.