Correlation Between Indika Energy and Delta Dunia

Can any of the company-specific risk be diversified away by investing in both Indika Energy and Delta Dunia 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 Delta Dunia 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 Delta Dunia Makmur, you can compare the effects of market volatilities on Indika Energy and Delta Dunia 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 Delta Dunia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indika Energy and Delta Dunia.

Diversification Opportunities for Indika Energy and Delta Dunia

0.56

Correlation Coefficient

Indika Energy  Delta Dunia

Very weak diversification

The 3 months correlation between Indika and Delta is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Indika Energy Tbk and Delta Dunia Makmur in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delta Dunia Makmur 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 Delta Dunia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delta Dunia Makmur has no effect on the direction of Indika Energy i.e., Indika Energy and Delta Dunia go up and down completely randomly.

Pair Corralation between Indika Energy and Delta Dunia

Assuming the 90 days trading horizon Indika Energy Tbk is expected to generate 0.96 times more return on investment than Delta Dunia. However, Indika Energy Tbk is 1.04 times less risky than Delta Dunia. It trades about -0.01 of its potential returns per unit of risk. Delta Dunia Makmur is currently generating about -0.09 per unit of risk. If you would invest  147,000  in Indika Energy Tbk on September 18, 2024 and sell it today you would lose (6,500) from holding Indika Energy Tbk or give up 4.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Indika Energy Tbk  vs.  Delta Dunia Makmur

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 quite persistent forward-looking signals, Indika Energy is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Delta Dunia Makmur

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Delta Dunia Makmur 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.

Pair Trading with Indika Energy and Delta Dunia

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

The idea behind Indika Energy Tbk and Delta Dunia Makmur 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.