Correlation Between Tanah Laut and PT Indonesia

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

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

Diversification Opportunities for Tanah Laut and PT Indonesia

-0.61

Correlation Coefficient

Tanah Laut  PT Indonesia

Excellent diversification

The 3 months correlation between Tanah and IPCC is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Tanah Laut 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 Tanah Laut 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 Tanah Laut 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 Tanah Laut i.e., Tanah Laut and PT Indonesia go up and down completely randomly.

Pair Corralation between Tanah Laut and PT Indonesia

Assuming the 90 days trading horizon Tanah Laut Tbk is expected to generate 0.66 times more return on investment than PT Indonesia. However, Tanah Laut Tbk is 1.52 times less risky than PT Indonesia. It trades about 0.41 of its potential returns per unit of risk. PT Indonesia Kendaraan is currently generating about 0.01 per unit of risk. If you would invest  8,000  in Tanah Laut Tbk on September 16, 2024 and sell it today you would earn a total of  900.00  from holding Tanah Laut Tbk or generate 11.25% return on investment over 90 days.

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

Tanah Laut Tbk  vs.  PT Indonesia Kendaraan

Tanah Laut Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tanah Laut Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Tanah Laut is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the 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 Tanah Laut and PT Indonesia

The main advantage of trading using opposite Tanah Laut and PT Indonesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tanah Laut 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 Tanah Laut 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.

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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.