Correlation Between Indika Energy and Citra Marga

Can any of the company-specific risk be diversified away by investing in both Indika Energy and Citra Marga 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 Indika Energy and Citra Marga into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Indika Energy Tbk and Citra Marga Nusaphala, you can compare the effects of market volatilities on Indika Energy and Citra Marga 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 Indika Energy with a short position of Citra Marga. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indika Energy and Citra Marga.

Diversification Opportunities for Indika Energy and Citra Marga

0.9

Correlation Coefficient

Indika Energy  Citra Marga

Almost no diversification

The 3 months correlation between Indika and Citra is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Indika Energy Tbk and Citra Marga Nusaphala in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citra Marga Nusaphala and Indika Energy 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 Indika Energy Tbk are associated (or correlated) with Citra Marga. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citra Marga Nusaphala has no effect on the direction of Indika Energy i.e., Indika Energy and Citra Marga go up and down completely randomly.

Pair Corralation between Indika Energy and Citra Marga

Assuming the 90 days trading horizon Indika Energy Tbk is expected to under-perform the Citra Marga. In addition to that, Indika Energy is 3.3 times more volatile than Citra Marga Nusaphala. It trades about -0.11 of its total potential returns per unit of risk. Citra Marga Nusaphala is currently generating about -0.14 per unit of volatility. If you would invest  150,000  in Citra Marga Nusaphala on September 28, 2024 and sell it today you would lose (10,000) from holding Citra Marga Nusaphala or give up 6.67% of portfolio value over 90 days.

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

Indika Energy Tbk  vs.  Citra Marga Nusaphala

Indika Energy Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indika Energy Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Citra Marga Nusaphala

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Citra Marga Nusaphala 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 Indika Energy and Citra Marga

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

The idea behind Indika Energy Tbk and Citra Marga Nusaphala 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .