Correlation Between PT Indonesia and Nusa Raya

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

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

Diversification Opportunities for PT Indonesia and Nusa Raya

0.14

Correlation Coefficient

PT Indonesia  Nusa Raya

Average diversification

The 3 months correlation between IPCC and Nusa is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding PT Indonesia Kendaraan and Nusa Raya Cipta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nusa Raya Cipta and PT Indonesia 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 Indonesia Kendaraan are associated (or correlated) with Nusa Raya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nusa Raya Cipta has no effect on the direction of PT Indonesia i.e., PT Indonesia and Nusa Raya go up and down completely randomly.

Pair Corralation between PT Indonesia and Nusa Raya

Assuming the 90 days trading horizon PT Indonesia Kendaraan is expected to generate 0.55 times more return on investment than Nusa Raya. However, PT Indonesia Kendaraan is 1.8 times less risky than Nusa Raya. It trades about 0.06 of its potential returns per unit of risk. Nusa Raya Cipta is currently generating about -0.01 per unit of risk. If you would invest  65,709  in PT Indonesia Kendaraan on September 19, 2024 and sell it today you would earn a total of  3,291  from holding PT Indonesia Kendaraan or generate 5.01% return on investment over 90 days.

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

PT Indonesia Kendaraan  vs.  Nusa Raya Cipta

PT Indonesia Kendaraan

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PT Indonesia Kendaraan are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, PT Indonesia is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Nusa Raya Cipta

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with PT Indonesia and Nusa Raya

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

The idea behind PT Indonesia Kendaraan and Nusa Raya Cipta 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 Global Correlations module to find global opportunities by holding instruments from different markets.