Correlation Between Indonesia Prima and Terregra Asia

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

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

Diversification Opportunities for Indonesia Prima and Terregra Asia

-0.6

Correlation Coefficient

Indonesia Prima  Terregra Asia

Excellent diversification

The 3 months correlation between Indonesia and Terregra is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Indonesia Prima Property and Terregra Asia Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terregra Asia Energy and Indonesia Prima 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 Indonesia Prima Property are associated (or correlated) with Terregra Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terregra Asia Energy has no effect on the direction of Indonesia Prima i.e., Indonesia Prima and Terregra Asia go up and down completely randomly.

Pair Corralation between Indonesia Prima and Terregra Asia

Assuming the 90 days trading horizon Indonesia Prima Property is expected to generate 0.4 times more return on investment than Terregra Asia. However, Indonesia Prima Property is 2.52 times less risky than Terregra Asia. It trades about -0.03 of its potential returns per unit of risk. Terregra Asia Energy is currently generating about -0.05 per unit of risk. If you would invest  49,000  in Indonesia Prima Property on September 14, 2024 and sell it today you would lose (7,800) from holding Indonesia Prima Property or give up 15.92% of portfolio value over 90 days.

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

Indonesia Prima Property  vs.  Terregra Asia Energy

Indonesia Prima Property

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Indonesia Prima Property are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Indonesia Prima is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Terregra Asia Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Terregra Asia 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 Indonesia Prima and Terregra Asia

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

The idea behind Indonesia Prima Property and Terregra Asia 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.

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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.