Correlation Between Indo Tambangraya and Exploitasi Energi

Can any of the company-specific risk be diversified away by investing in both Indo Tambangraya and Exploitasi Energi 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 Indo Tambangraya and Exploitasi Energi into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Indo Tambangraya Megah and Exploitasi Energi Indonesia, you can compare the effects of market volatilities on Indo Tambangraya and Exploitasi Energi 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 Indo Tambangraya with a short position of Exploitasi Energi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indo Tambangraya and Exploitasi Energi.

Diversification Opportunities for Indo Tambangraya and Exploitasi Energi

0.22

Correlation Coefficient

Indo Tambangraya  Exploitasi Energi

Modest diversification

The 3 months correlation between Indo and Exploitasi is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Indo Tambangraya Megah and Exploitasi Energi Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exploitasi Energi and Indo Tambangraya 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 Indo Tambangraya Megah are associated (or correlated) with Exploitasi Energi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exploitasi Energi has no effect on the direction of Indo Tambangraya i.e., Indo Tambangraya and Exploitasi Energi go up and down completely randomly.

Pair Corralation between Indo Tambangraya and Exploitasi Energi

Assuming the 90 days trading horizon Indo Tambangraya is expected to generate 1.44 times less return on investment than Exploitasi Energi. But when comparing it to its historical volatility, Indo Tambangraya Megah is 3.85 times less risky than Exploitasi Energi. It trades about 0.02 of its potential returns per unit of risk. Exploitasi Energi Indonesia is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  5,000  in Exploitasi Energi Indonesia on September 28, 2024 and sell it today you would lose (3,000) from holding Exploitasi Energi Indonesia or give up 60.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Indo Tambangraya Megah  vs.  Exploitasi Energi Indonesia

Indo Tambangraya Megah

Risk-Adjusted Performance

0 of 100

Very Weak

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

Exploitasi Energi

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Exploitasi Energi Indonesia are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Exploitasi Energi disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Indo Tambangraya and Exploitasi Energi

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

The idea behind Indo Tambangraya Megah and Exploitasi Energi Indonesia 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.