Correlation Between Energi Mega and Berlian Laju

Can any of the company-specific risk be diversified away by investing in both Energi Mega and Berlian Laju 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 Energi Mega and Berlian Laju into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Energi Mega Persada and Berlian Laju Tanker, you can compare the effects of market volatilities on Energi Mega and Berlian Laju 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 Energi Mega with a short position of Berlian Laju. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energi Mega and Berlian Laju.

Diversification Opportunities for Energi Mega and Berlian Laju

0.43

Correlation Coefficient

Energi Mega  Berlian Laju

Very weak diversification

The 3 months correlation between Energi and Berlian is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Energi Mega Persada and Berlian Laju Tanker in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berlian Laju Tanker and Energi Mega 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 Energi Mega Persada are associated (or correlated) with Berlian Laju. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Berlian Laju Tanker has no effect on the direction of Energi Mega i.e., Energi Mega and Berlian Laju go up and down completely randomly.

Pair Corralation between Energi Mega and Berlian Laju

Assuming the 90 days trading horizon Energi Mega Persada is expected to generate 1.11 times more return on investment than Berlian Laju. However, Energi Mega is 1.11 times more volatile than Berlian Laju Tanker. It trades about 0.11 of its potential returns per unit of risk. Berlian Laju Tanker is currently generating about 0.0 per unit of risk. If you would invest  20,000  in Energi Mega Persada on September 13, 2024 and sell it today you would earn a total of  5,200  from holding Energi Mega Persada or generate 26.0% return on investment over 90 days.

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

Energi Mega Persada  vs.  Berlian Laju Tanker

Energi Mega Persada

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Energi Mega Persada are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Energi Mega disclosed solid returns over the last few months and may actually be approaching a breakup point.

Berlian Laju Tanker

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Berlian Laju Tanker has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Berlian Laju 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 Energi Mega and Berlian Laju

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

The idea behind Energi Mega Persada and Berlian Laju Tanker 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.