Correlation Between Tirta Mahakam and Indo Acidatama

Can any of the company-specific risk be diversified away by investing in both Tirta Mahakam and Indo Acidatama 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 Tirta Mahakam and Indo Acidatama into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tirta Mahakam Resources and Indo Acidatama Tbk, you can compare the effects of market volatilities on Tirta Mahakam and Indo Acidatama 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 Tirta Mahakam with a short position of Indo Acidatama. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tirta Mahakam and Indo Acidatama.

Diversification Opportunities for Tirta Mahakam and Indo Acidatama

0.3

Correlation Coefficient

Tirta Mahakam  Indo Acidatama

Weak diversification

The 3 months correlation between Tirta and Indo is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Tirta Mahakam Resources and Indo Acidatama Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indo Acidatama Tbk and Tirta Mahakam 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 Tirta Mahakam Resources are associated (or correlated) with Indo Acidatama. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indo Acidatama Tbk has no effect on the direction of Tirta Mahakam i.e., Tirta Mahakam and Indo Acidatama go up and down completely randomly.

Pair Corralation between Tirta Mahakam and Indo Acidatama

Assuming the 90 days trading horizon Tirta Mahakam Resources is expected to generate 4.79 times more return on investment than Indo Acidatama. However, Tirta Mahakam is 4.79 times more volatile than Indo Acidatama Tbk. It trades about 0.12 of its potential returns per unit of risk. Indo Acidatama Tbk is currently generating about -0.06 per unit of risk. If you would invest  4,100  in Tirta Mahakam Resources on September 14, 2024 and sell it today you would earn a total of  1,900  from holding Tirta Mahakam Resources or generate 46.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Tirta Mahakam Resources  vs.  Indo Acidatama Tbk

Tirta Mahakam Resources

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tirta Mahakam Resources are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Tirta Mahakam disclosed solid returns over the last few months and may actually be approaching a breakup point.

Indo Acidatama Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indo Acidatama Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Indo Acidatama 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 Tirta Mahakam and Indo Acidatama

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

The idea behind Tirta Mahakam Resources and Indo Acidatama 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.