Correlation Between Merdeka Copper and Pertamina Geothermal

Can any of the company-specific risk be diversified away by investing in both Merdeka Copper and Pertamina Geothermal 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 Merdeka Copper and Pertamina Geothermal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Merdeka Copper Gold and Pertamina Geothermal Energy, you can compare the effects of market volatilities on Merdeka Copper and Pertamina Geothermal 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 Merdeka Copper with a short position of Pertamina Geothermal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merdeka Copper and Pertamina Geothermal.

Diversification Opportunities for Merdeka Copper and Pertamina Geothermal

0.88

Correlation Coefficient

Merdeka Copper  Pertamina Geothermal

Very poor diversification

The 3 months correlation between Merdeka and Pertamina is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Merdeka Copper Gold and Pertamina Geothermal Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pertamina Geothermal and Merdeka Copper 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 Merdeka Copper Gold are associated (or correlated) with Pertamina Geothermal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pertamina Geothermal has no effect on the direction of Merdeka Copper i.e., Merdeka Copper and Pertamina Geothermal go up and down completely randomly.

Pair Corralation between Merdeka Copper and Pertamina Geothermal

Assuming the 90 days trading horizon Merdeka Copper Gold is expected to under-perform the Pertamina Geothermal. In addition to that, Merdeka Copper is 1.53 times more volatile than Pertamina Geothermal Energy. It trades about -0.11 of its total potential returns per unit of risk. Pertamina Geothermal Energy is currently generating about -0.16 per unit of volatility. If you would invest  112,000  in Pertamina Geothermal Energy on September 16, 2024 and sell it today you would lose (16,500) from holding Pertamina Geothermal Energy or give up 14.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Merdeka Copper Gold  vs.  Pertamina Geothermal Energy

Merdeka Copper Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Merdeka Copper Gold 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.

Pertamina Geothermal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pertamina Geothermal Energy 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 Merdeka Copper and Pertamina Geothermal

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

The idea behind Merdeka Copper Gold and Pertamina Geothermal Energy 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..