Correlation Between Tembaga Mulia and Pelangi Indah

Can any of the company-specific risk be diversified away by investing in both Tembaga Mulia and Pelangi Indah 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 Tembaga Mulia and Pelangi Indah into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tembaga Mulia Semanan and Pelangi Indah Canindo, you can compare the effects of market volatilities on Tembaga Mulia and Pelangi Indah 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 Tembaga Mulia with a short position of Pelangi Indah. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tembaga Mulia and Pelangi Indah.

Diversification Opportunities for Tembaga Mulia and Pelangi Indah

0.27

Correlation Coefficient

Tembaga Mulia  Pelangi Indah

Modest diversification

The 3 months correlation between Tembaga and Pelangi is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Tembaga Mulia Semanan and Pelangi Indah Canindo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pelangi Indah Canindo and Tembaga Mulia 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 Tembaga Mulia Semanan are associated (or correlated) with Pelangi Indah. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pelangi Indah Canindo has no effect on the direction of Tembaga Mulia i.e., Tembaga Mulia and Pelangi Indah go up and down completely randomly.

Pair Corralation between Tembaga Mulia and Pelangi Indah

Assuming the 90 days trading horizon Tembaga Mulia is expected to generate 9.93 times less return on investment than Pelangi Indah. But when comparing it to its historical volatility, Tembaga Mulia Semanan is 3.32 times less risky than Pelangi Indah. It trades about 0.02 of its potential returns per unit of risk. Pelangi Indah Canindo is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  12,800  in Pelangi Indah Canindo on September 14, 2024 and sell it today you would earn a total of  1,400  from holding Pelangi Indah Canindo or generate 10.94% return on investment over 90 days.

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

Tembaga Mulia Semanan  vs.  Pelangi Indah Canindo

Tembaga Mulia Semanan

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tembaga Mulia Semanan are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Tembaga Mulia is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pelangi Indah Canindo

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pelangi Indah Canindo are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Pelangi Indah disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tembaga Mulia and Pelangi Indah

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

The idea behind Tembaga Mulia Semanan and Pelangi Indah Canindo 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.