Correlation Between Nanotech Indonesia and Optima Prima

Can any of the company-specific risk be diversified away by investing in both Nanotech Indonesia and Optima Prima 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 Nanotech Indonesia and Optima Prima into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nanotech Indonesia Global and Optima Prima Metal, you can compare the effects of market volatilities on Nanotech Indonesia and Optima Prima 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 Nanotech Indonesia with a short position of Optima Prima. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nanotech Indonesia and Optima Prima.

Diversification Opportunities for Nanotech Indonesia and Optima Prima

-0.69

Correlation Coefficient

Nanotech Indonesia  Optima Prima

Excellent diversification

The 3 months correlation between Nanotech and Optima is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Nanotech Indonesia Global and Optima Prima Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optima Prima Metal and Nanotech Indonesia 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 Nanotech Indonesia Global are associated (or correlated) with Optima Prima. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optima Prima Metal has no effect on the direction of Nanotech Indonesia i.e., Nanotech Indonesia and Optima Prima go up and down completely randomly.

Pair Corralation between Nanotech Indonesia and Optima Prima

Assuming the 90 days trading horizon Nanotech Indonesia Global is expected to generate 0.95 times more return on investment than Optima Prima. However, Nanotech Indonesia Global is 1.05 times less risky than Optima Prima. It trades about 0.09 of its potential returns per unit of risk. Optima Prima Metal is currently generating about -0.35 per unit of risk. If you would invest  1,700  in Nanotech Indonesia Global on September 19, 2024 and sell it today you would earn a total of  300.00  from holding Nanotech Indonesia Global or generate 17.65% return on investment over 90 days.

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

Nanotech Indonesia Global  vs.  Optima Prima Metal

Nanotech Indonesia Global

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nanotech Indonesia Global are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Nanotech Indonesia disclosed solid returns over the last few months and may actually be approaching a breakup point.

Optima Prima Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Optima Prima Metal 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 Nanotech Indonesia and Optima Prima

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

The idea behind Nanotech Indonesia Global and Optima Prima Metal 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.