Correlation Between Ekadharma International and PT Indonesia

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

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

Diversification Opportunities for Ekadharma International and PT Indonesia

-0.84

Correlation Coefficient

Ekadharma International  PT Indonesia

Pay attention - limited upside

The 3 months correlation between Ekadharma and IPCC is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Ekadharma International Tbk and PT Indonesia Kendaraan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Indonesia Kendaraan and Ekadharma International 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 Ekadharma International Tbk are associated (or correlated) with PT Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Indonesia Kendaraan has no effect on the direction of Ekadharma International i.e., Ekadharma International and PT Indonesia go up and down completely randomly.

Pair Corralation between Ekadharma International and PT Indonesia

Assuming the 90 days trading horizon Ekadharma International Tbk is expected to under-perform the PT Indonesia. But the stock apears to be less risky and, when comparing its historical volatility, Ekadharma International Tbk is 1.53 times less risky than PT Indonesia. The stock trades about -0.14 of its potential returns per unit of risk. The PT Indonesia Kendaraan is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  65,226  in PT Indonesia Kendaraan on September 16, 2024 and sell it today you would earn a total of  6,274  from holding PT Indonesia Kendaraan or generate 9.62% return on investment over 90 days.

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

Ekadharma International Tbk  vs.  PT Indonesia Kendaraan

Ekadharma International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ekadharma International Tbk 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.

PT Indonesia Kendaraan

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PT Indonesia Kendaraan are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, PT Indonesia may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ekadharma International and PT Indonesia

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

The idea behind Ekadharma International Tbk and PT Indonesia Kendaraan 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.