Correlation Between Indo Oil and Nusa Palapa

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

By analyzing existing cross correlation between Indo Oil Perkasa and Nusa Palapa Gemilang, you can compare the effects of market volatilities on Indo Oil and Nusa Palapa 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 Oil with a short position of Nusa Palapa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indo Oil and Nusa Palapa.

Diversification Opportunities for Indo Oil and Nusa Palapa

0.13

Correlation Coefficient

Indo Oil  Nusa Palapa

Average diversification

The 3 months correlation between Indo and Nusa is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Indo Oil Perkasa and Nusa Palapa Gemilang in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nusa Palapa Gemilang and Indo Oil 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 Oil Perkasa are associated (or correlated) with Nusa Palapa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nusa Palapa Gemilang has no effect on the direction of Indo Oil i.e., Indo Oil and Nusa Palapa go up and down completely randomly.

Pair Corralation between Indo Oil and Nusa Palapa

Assuming the 90 days trading horizon Indo Oil Perkasa is expected to under-perform the Nusa Palapa. But the stock apears to be less risky and, when comparing its historical volatility, Indo Oil Perkasa is 2.71 times less risky than Nusa Palapa. The stock trades about -0.03 of its potential returns per unit of risk. The Nusa Palapa Gemilang is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  3,500  in Nusa Palapa Gemilang on September 15, 2024 and sell it today you would earn a total of  100.00  from holding Nusa Palapa Gemilang or generate 2.86% return on investment over 90 days.

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

Indo Oil Perkasa  vs.  Nusa Palapa Gemilang

Indo Oil Perkasa

Risk-Adjusted Performance

0 of 100

Very Weak

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

Nusa Palapa Gemilang

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nusa Palapa Gemilang are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Nusa Palapa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Indo Oil and Nusa Palapa

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

The idea behind Indo Oil Perkasa and Nusa Palapa Gemilang 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.