Correlation Between PT Indo and Home Depot

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

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

Diversification Opportunities for PT Indo and Home Depot

0.85

Correlation Coefficient

PT Indo  Home Depot

Very poor diversification

The 3 months correlation between 3IB and Home is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding PT Indo Tambangraya and The Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and PT Indo 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 Indo Tambangraya are associated (or correlated) with Home Depot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Depot has no effect on the direction of PT Indo i.e., PT Indo and Home Depot go up and down completely randomly.

Pair Corralation between PT Indo and Home Depot

Assuming the 90 days trading horizon PT Indo Tambangraya is expected to under-perform the Home Depot. In addition to that, PT Indo is 1.65 times more volatile than The Home Depot. It trades about -0.12 of its total potential returns per unit of risk. The Home Depot is currently generating about -0.13 per unit of volatility. If you would invest  37,181  in The Home Depot on December 22, 2024 and sell it today you would lose (4,671) from holding The Home Depot or give up 12.56% of portfolio value over 90 days.

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

PT Indo Tambangraya  vs.  The Home Depot

PT Indo Tambangraya

Risk-Adjusted Performance

Very Weak

Over the last 90 days PT Indo Tambangraya has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Home Depot

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Home Depot has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's forward indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with PT Indo and Home Depot

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

The idea behind PT Indo Tambangraya and The Home Depot 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.