Correlation Between INDO RAMA and New China

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Can any of the company-specific risk be diversified away by investing in both INDO RAMA and New China 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 INDO RAMA and New China into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between INDO RAMA SYNTHETIC and New China Life, you can compare the effects of market volatilities on INDO RAMA and New China 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 INDO RAMA with a short position of New China. Check out your portfolio center. Please also check ongoing floating volatility patterns of INDO RAMA and New China.

Diversification Opportunities for INDO RAMA and New China

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  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between INDO and New is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding INDO RAMA SYNTHETIC and New China Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New China Life and INDO RAMA 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 INDO RAMA SYNTHETIC are associated (or correlated) with New China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New China Life has no effect on the direction of INDO RAMA i.e., INDO RAMA and New China go up and down completely randomly.

Pair Corralation between INDO RAMA and New China

Assuming the 90 days trading horizon INDO RAMA is expected to generate 11.89 times less return on investment than New China. But when comparing it to its historical volatility, INDO RAMA SYNTHETIC is 3.6 times less risky than New China. It trades about 0.03 of its potential returns per unit of risk. New China Life is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  75.00  in New China Life on October 8, 2024 and sell it today you would earn a total of  199.00  from holding New China Life or generate 265.33% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy99.66%
ValuesDaily Returns

INDO RAMA SYNTHETIC  vs.  New China Life

 Performance 
       Timeline  
INDO RAMA SYNTHETIC 

Risk-Adjusted Performance

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Over the last 90 days INDO RAMA SYNTHETIC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, INDO RAMA is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.
New China Life 

Risk-Adjusted Performance

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Compared to the overall equity markets, risk-adjusted returns on investments in New China Life are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile essential indicators, New China may actually be approaching a critical reversion point that can send shares even higher in February 2025.

INDO RAMA and New China Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with INDO RAMA and New China

The main advantage of trading using opposite INDO RAMA and New China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INDO RAMA position performs unexpectedly, New China 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 New China will offset losses from the drop in New China's long position.
The idea behind INDO RAMA SYNTHETIC and New China Life 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.

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