Correlation Between Indonesian Tobacco and Indosterling Technomedia

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

Diversification Opportunities for Indonesian Tobacco and Indosterling Technomedia

0.0

Correlation Coefficient

Indonesian Tobacco  Indosterling Technomedia

Pay attention - limited upside

The 3 months correlation between Indonesian and Indosterling is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Indonesian Tobacco Tbk and Indosterling Technomedia Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indosterling Technomedia 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 Indosterling Technomedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indosterling Technomedia has no effect on the direction of Indonesian Tobacco i.e., Indonesian Tobacco and Indosterling Technomedia go up and down completely randomly.

Pair Corralation between Indonesian Tobacco and Indosterling Technomedia

If you would invest  5,000  in Indosterling Technomedia Tbk on September 5, 2024 and sell it today you would earn a total of  0.00  from holding Indosterling Technomedia Tbk or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Indonesian Tobacco Tbk  vs.  Indosterling Technomedia Tbk

Indonesian Tobacco Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

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

Indosterling Technomedia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indosterling Technomedia Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Indosterling Technomedia 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 Indonesian Tobacco and Indosterling Technomedia

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

The idea behind Indonesian Tobacco Tbk and Indosterling Technomedia 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.

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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.