Correlation Between Cita Mineral and Resource Alam

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

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

Diversification Opportunities for Cita Mineral and Resource Alam

-0.8

Correlation Coefficient

Cita Mineral  Resource Alam

Pay attention - limited upside

The 3 months correlation between Cita and Resource is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Cita Mineral Investindo and Resource Alam Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Resource Alam Indonesia and Cita Mineral 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 Cita Mineral Investindo are associated (or correlated) with Resource Alam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Resource Alam Indonesia has no effect on the direction of Cita Mineral i.e., Cita Mineral and Resource Alam go up and down completely randomly.

Pair Corralation between Cita Mineral and Resource Alam

Assuming the 90 days trading horizon Cita Mineral Investindo is expected to generate 1.91 times more return on investment than Resource Alam. However, Cita Mineral is 1.91 times more volatile than Resource Alam Indonesia. It trades about 0.15 of its potential returns per unit of risk. Resource Alam Indonesia is currently generating about -0.06 per unit of risk. 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 Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Cita Mineral Investindo  vs.  Resource Alam Indonesia

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.

Resource Alam Indonesia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Resource Alam Indonesia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Cita Mineral and Resource Alam

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

The idea behind Cita Mineral Investindo and Resource Alam 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.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.