Correlation Between Indo Tambangraya and Putra Rajawali

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

Diversification Opportunities for Indo Tambangraya and Putra Rajawali

-0.48

Correlation Coefficient

Indo Tambangraya  Putra Rajawali

Very good diversification

The 3 months correlation between Indo and Putra is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Indo Tambangraya Megah and Putra Rajawali Kencana in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putra Rajawali Kencana 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 Putra Rajawali. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putra Rajawali Kencana has no effect on the direction of Indo Tambangraya i.e., Indo Tambangraya and Putra Rajawali go up and down completely randomly.

Pair Corralation between Indo Tambangraya and Putra Rajawali

Assuming the 90 days trading horizon Indo Tambangraya Megah is expected to generate 0.22 times more return on investment than Putra Rajawali. However, Indo Tambangraya Megah is 4.61 times less risky than Putra Rajawali. It trades about 0.12 of its potential returns per unit of risk. Putra Rajawali Kencana is currently generating about -0.09 per unit of risk. If you would invest  2,585,000  in Indo Tambangraya Megah on September 16, 2024 and sell it today you would earn a total of  195,000  from holding Indo Tambangraya Megah or generate 7.54% return on investment over 90 days.

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

Indo Tambangraya Megah  vs.  Putra Rajawali Kencana

Indo Tambangraya Megah

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Indo Tambangraya Megah are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Indo Tambangraya may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Putra Rajawali Kencana

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Putra Rajawali Kencana 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.

Pair Trading with Indo Tambangraya and Putra Rajawali

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

The idea behind Indo Tambangraya Megah and Putra Rajawali Kencana 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.