Correlation Between Perusahaan Gas and Indika Energy

Can any of the company-specific risk be diversified away by investing in both Perusahaan Gas and Indika Energy 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 Perusahaan Gas and Indika Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Perusahaan Gas Negara and Indika Energy Tbk, you can compare the effects of market volatilities on Perusahaan Gas and Indika Energy 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 Perusahaan Gas with a short position of Indika Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Perusahaan Gas and Indika Energy.

Diversification Opportunities for Perusahaan Gas and Indika Energy

-0.45

Correlation Coefficient

Perusahaan Gas  Indika Energy

Very good diversification

The 3 months correlation between Perusahaan and Indika is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Perusahaan Gas Negara and Indika Energy Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indika Energy Tbk and Perusahaan Gas 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 Perusahaan Gas Negara are associated (or correlated) with Indika Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indika Energy Tbk has no effect on the direction of Perusahaan Gas i.e., Perusahaan Gas and Indika Energy go up and down completely randomly.

Pair Corralation between Perusahaan Gas and Indika Energy

Assuming the 90 days trading horizon Perusahaan Gas Negara is expected to generate 0.93 times more return on investment than Indika Energy. However, Perusahaan Gas Negara is 1.08 times less risky than Indika Energy. It trades about -0.01 of its potential returns per unit of risk. Indika Energy Tbk is currently generating about -0.02 per unit of risk. If you would invest  157,000  in Perusahaan Gas Negara on September 25, 2024 and sell it today you would lose (1,500) from holding Perusahaan Gas Negara or give up 0.96% of portfolio value over 90 days.

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

Perusahaan Gas Negara  vs.  Indika Energy Tbk

Perusahaan Gas Negara

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Perusahaan Gas Negara are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Perusahaan Gas may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Indika Energy Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indika Energy Tbk 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 Perusahaan Gas and Indika Energy

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

The idea behind Perusahaan Gas Negara and Indika Energy Tbk 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..