Correlation Between PT Indosat and Altair Engineering

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

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

Diversification Opportunities for PT Indosat and Altair Engineering

-0.64

Correlation Coefficient

PT Indosat  Altair Engineering

Excellent diversification

The 3 months correlation between IDO1 and Altair is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding PT Indosat Tbk and Altair Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altair Engineering and PT Indosat 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 PT Indosat Tbk are associated (or correlated) with Altair Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altair Engineering has no effect on the direction of PT Indosat i.e., PT Indosat and Altair Engineering go up and down completely randomly.

Pair Corralation between PT Indosat and Altair Engineering

Assuming the 90 days trading horizon PT Indosat Tbk is expected to generate 8.66 times more return on investment than Altair Engineering. However, PT Indosat is 8.66 times more volatile than Altair Engineering. It trades about 0.1 of its potential returns per unit of risk. Altair Engineering is currently generating about 0.15 per unit of risk. If you would invest  12.00  in PT Indosat Tbk on September 25, 2024 and sell it today you would earn a total of  3.00  from holding PT Indosat Tbk or generate 25.0% return on investment over 90 days.

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

PT Indosat Tbk  vs.  Altair Engineering

PT Indosat Tbk

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PT Indosat Tbk are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PT Indosat reported solid returns over the last few months and may actually be approaching a breakup point.

Altair Engineering

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Altair Engineering are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Altair Engineering reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Indosat and Altair Engineering

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

The idea behind PT Indosat Tbk and Altair Engineering 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.