Correlation Between Indika Energy and Petrosea Tbk

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

Diversification Opportunities for Indika Energy and Petrosea Tbk

-0.82

Correlation Coefficient

Indika Energy  Petrosea Tbk

Pay attention - limited upside

The 3 months correlation between Indika and Petrosea is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Indika Energy Tbk and Petrosea Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrosea Tbk 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 Petrosea Tbk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petrosea Tbk has no effect on the direction of Indika Energy i.e., Indika Energy and Petrosea Tbk go up and down completely randomly.

Pair Corralation between Indika Energy and Petrosea Tbk

Assuming the 90 days trading horizon Indika Energy Tbk is expected to under-perform the Petrosea Tbk. But the stock apears to be less risky and, when comparing its historical volatility, Indika Energy Tbk is 1.55 times less risky than Petrosea Tbk. The stock trades about -0.12 of its potential returns per unit of risk. The Petrosea Tbk is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  1,345,000  in Petrosea Tbk on September 27, 2024 and sell it today you would earn a total of  1,460,000  from holding Petrosea Tbk or generate 108.55% return on investment over 90 days.

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

Indika Energy Tbk  vs.  Petrosea Tbk

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.

Petrosea Tbk

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Petrosea Tbk are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Petrosea Tbk disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Indika Energy and Petrosea Tbk

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

The idea behind Indika Energy Tbk and Petrosea Tbk 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 Commodity Directory module to find actively traded commodities issued by global exchanges.