Correlation Between Transcoal Pacific and Putra Rajawali

Can any of the company-specific risk be diversified away by investing in both Transcoal Pacific and Putra Rajawali 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 Transcoal Pacific and Putra Rajawali into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Transcoal Pacific Tbk and Putra Rajawali Kencana, you can compare the effects of market volatilities on Transcoal Pacific and Putra Rajawali 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 Transcoal Pacific with a short position of Putra Rajawali. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transcoal Pacific and Putra Rajawali.

Diversification Opportunities for Transcoal Pacific and Putra Rajawali

-0.16

Correlation Coefficient

Transcoal Pacific  Putra Rajawali

Good diversification

The 3 months correlation between Transcoal and Putra is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Transcoal Pacific Tbk and Putra Rajawali Kencana in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putra Rajawali Kencana and Transcoal Pacific 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 Transcoal Pacific Tbk are associated (or correlated) with Putra Rajawali. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putra Rajawali Kencana has no effect on the direction of Transcoal Pacific i.e., Transcoal Pacific and Putra Rajawali go up and down completely randomly.

Pair Corralation between Transcoal Pacific and Putra Rajawali

Assuming the 90 days trading horizon Transcoal Pacific Tbk is expected to generate 0.41 times more return on investment than Putra Rajawali. However, Transcoal Pacific Tbk is 2.45 times less risky than Putra Rajawali. It trades about 0.02 of its potential returns per unit of risk. Putra Rajawali Kencana is currently generating about -0.09 per unit of risk. If you would invest  685,000  in Transcoal Pacific Tbk on September 15, 2024 and sell it today you would earn a total of  5,000  from holding Transcoal Pacific Tbk or generate 0.73% return on investment over 90 days.

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

Transcoal Pacific Tbk  vs.  Putra Rajawali Kencana

Transcoal Pacific Tbk

Risk-Adjusted Performance

1 of 100

Weak

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

Putra Rajawali Kencana

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Putra Rajawali Kencana 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 Transcoal Pacific and Putra Rajawali

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

The idea behind Transcoal Pacific Tbk and Putra Rajawali Kencana 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.