Correlation Between Pertamina Geothermal and Wulandari Bangun

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

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

Diversification Opportunities for Pertamina Geothermal and Wulandari Bangun

0.87

Correlation Coefficient

Pertamina Geothermal  Wulandari Bangun

Very poor diversification

The 3 months correlation between Pertamina and Wulandari is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Pertamina Geothermal Energy and Wulandari Bangun Laksana in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wulandari Bangun Laksana and Pertamina Geothermal 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 Pertamina Geothermal Energy are associated (or correlated) with Wulandari Bangun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wulandari Bangun Laksana has no effect on the direction of Pertamina Geothermal i.e., Pertamina Geothermal and Wulandari Bangun go up and down completely randomly.

Pair Corralation between Pertamina Geothermal and Wulandari Bangun

Assuming the 90 days trading horizon Pertamina Geothermal Energy is expected to under-perform the Wulandari Bangun. But the stock apears to be less risky and, when comparing its historical volatility, Pertamina Geothermal Energy is 1.48 times less risky than Wulandari Bangun. The stock trades about -0.22 of its potential returns per unit of risk. The Wulandari Bangun Laksana is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  5,800  in Wulandari Bangun Laksana on September 19, 2024 and sell it today you would lose (800.00) from holding Wulandari Bangun Laksana or give up 13.79% of portfolio value over 90 days.

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

Pertamina Geothermal Energy  vs.  Wulandari Bangun Laksana

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.

Wulandari Bangun Laksana

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wulandari Bangun Laksana 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 Pertamina Geothermal and Wulandari Bangun

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

The idea behind Pertamina Geothermal Energy and Wulandari Bangun Laksana 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.