Correlation Between Pertamina Geothermal and Capital Financial

Can any of the company-specific risk be diversified away by investing in both Pertamina Geothermal and Capital Financial 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 Capital Financial 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 Capital Financial Indonesia, you can compare the effects of market volatilities on Pertamina Geothermal and Capital Financial 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 Capital Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pertamina Geothermal and Capital Financial.

Diversification Opportunities for Pertamina Geothermal and Capital Financial

-0.5

Correlation Coefficient

Pertamina Geothermal  Capital Financial

Very good diversification

The 3 months correlation between Pertamina and Capital is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Pertamina Geothermal Energy and Capital Financial Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Financial 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 Capital Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Financial has no effect on the direction of Pertamina Geothermal i.e., Pertamina Geothermal and Capital Financial go up and down completely randomly.

Pair Corralation between Pertamina Geothermal and Capital Financial

Assuming the 90 days trading horizon Pertamina Geothermal Energy is expected to under-perform the Capital Financial. But the stock apears to be less risky and, when comparing its historical volatility, Pertamina Geothermal Energy is 1.8 times less risky than Capital Financial. The stock trades about -0.16 of its potential returns per unit of risk. The Capital Financial Indonesia is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  50,500  in Capital Financial Indonesia on September 17, 2024 and sell it today you would earn a total of  1,500  from holding Capital Financial Indonesia or generate 2.97% return on investment over 90 days.

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

Pertamina Geothermal Energy  vs.  Capital Financial Indonesia

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.

Capital Financial

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Financial Indonesia are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Capital Financial is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Pertamina Geothermal and Capital Financial

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

The idea behind Pertamina Geothermal Energy and Capital Financial Indonesia 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.