Correlation Between Indonesian Tobacco and J Resources
Can any of the company-specific risk be diversified away by investing in both Indonesian Tobacco and J Resources 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 Indonesian Tobacco and J Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Indonesian Tobacco Tbk and J Resources Asia, you can compare the effects of market volatilities on Indonesian Tobacco and J Resources 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 Indonesian Tobacco with a short position of J Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indonesian Tobacco and J Resources.
Diversification Opportunities for Indonesian Tobacco and J Resources
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Indonesian and PSAB is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Indonesian Tobacco Tbk and J Resources Asia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on J Resources Asia and Indonesian Tobacco 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 Indonesian Tobacco Tbk are associated (or correlated) with J Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of J Resources Asia has no effect on the direction of Indonesian Tobacco i.e., Indonesian Tobacco and J Resources go up and down completely randomly.
Pair Corralation between Indonesian Tobacco and J Resources
Assuming the 90 days trading horizon Indonesian Tobacco is expected to generate 18.35 times less return on investment than J Resources. But when comparing it to its historical volatility, Indonesian Tobacco Tbk is 3.66 times less risky than J Resources. It trades about 0.02 of its potential returns per unit of risk. J Resources Asia is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 23,000 in J Resources Asia on September 6, 2024 and sell it today you would earn a total of 8,800 from holding J Resources Asia or generate 38.26% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Indonesian Tobacco Tbk vs. J Resources Asia
Performance |
Timeline |
Indonesian Tobacco Tbk |
J Resources Asia |
Indonesian Tobacco and J Resources Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Indonesian Tobacco and J Resources
The main advantage of trading using opposite Indonesian Tobacco and J Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indonesian Tobacco position performs unexpectedly, J Resources 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 J Resources will offset losses from the drop in J Resources' long position.Indonesian Tobacco vs. Wismilak Inti Makmur | Indonesian Tobacco vs. J Resources Asia | Indonesian Tobacco vs. Transcoal Pacific Tbk | Indonesian Tobacco vs. Garudafood Putra Putri |
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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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