Correlation Between PT Cerestar and Indo Oil

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

By analyzing existing cross correlation between PT Cerestar Indonesia and Indo Oil Perkasa, you can compare the effects of market volatilities on PT Cerestar and Indo Oil 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 PT Cerestar with a short position of Indo Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Cerestar and Indo Oil.

Diversification Opportunities for PT Cerestar and Indo Oil

-0.47

Correlation Coefficient

PT Cerestar  Indo Oil

Very good diversification

The 3 months correlation between TRGU and Indo is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding PT Cerestar Indonesia and Indo Oil Perkasa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indo Oil Perkasa and PT Cerestar 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 PT Cerestar Indonesia are associated (or correlated) with Indo Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indo Oil Perkasa has no effect on the direction of PT Cerestar i.e., PT Cerestar and Indo Oil go up and down completely randomly.

Pair Corralation between PT Cerestar and Indo Oil

Assuming the 90 days trading horizon PT Cerestar Indonesia is expected to generate 0.7 times more return on investment than Indo Oil. However, PT Cerestar Indonesia is 1.42 times less risky than Indo Oil. It trades about 0.06 of its potential returns per unit of risk. Indo Oil Perkasa is currently generating about -0.03 per unit of risk. If you would invest  19,700  in PT Cerestar Indonesia on September 16, 2024 and sell it today you would earn a total of  700.00  from holding PT Cerestar Indonesia or generate 3.55% return on investment over 90 days.

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

PT Cerestar Indonesia  vs.  Indo Oil Perkasa

PT Cerestar Indonesia

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PT Cerestar Indonesia are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, PT Cerestar is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Indo Oil Perkasa

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indo Oil Perkasa has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Indo Oil 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 PT Cerestar and Indo Oil

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

The idea behind PT Cerestar Indonesia and Indo Oil Perkasa 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.