Correlation Between INDO RAMA and CHEMICAL INDUSTRIES

Can any of the company-specific risk be diversified away by investing in both INDO RAMA and CHEMICAL INDUSTRIES 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 CHEMICAL INDUSTRIES 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 CHEMICAL INDUSTRIES, you can compare the effects of market volatilities on INDO RAMA and CHEMICAL INDUSTRIES 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 CHEMICAL INDUSTRIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of INDO RAMA and CHEMICAL INDUSTRIES.

Diversification Opportunities for INDO RAMA and CHEMICAL INDUSTRIES

-1.0

Correlation Coefficient

INDO RAMA  CHEMICAL INDUSTRIES

Pay attention - limited upside

The 3 months correlation between INDO and CHEMICAL is -1.0. Overlapping area represents the amount of risk that can be diversified away by holding INDO RAMA SYNTHETIC and CHEMICAL INDUSTRIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHEMICAL INDUSTRIES 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 CHEMICAL INDUSTRIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHEMICAL INDUSTRIES has no effect on the direction of INDO RAMA i.e., INDO RAMA and CHEMICAL INDUSTRIES go up and down completely randomly.

Pair Corralation between INDO RAMA and CHEMICAL INDUSTRIES

Assuming the 90 days trading horizon INDO RAMA SYNTHETIC is expected to under-perform the CHEMICAL INDUSTRIES. In addition to that, INDO RAMA is 12.61 times more volatile than CHEMICAL INDUSTRIES. It trades about -0.02 of its total potential returns per unit of risk. CHEMICAL INDUSTRIES is currently generating about 0.06 per unit of volatility. If you would invest  40.00  in CHEMICAL INDUSTRIES on October 8, 2024 and sell it today you would earn a total of  3.00  from holding CHEMICAL INDUSTRIES or generate 7.5% return on investment over 90 days.

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

INDO RAMA SYNTHETIC  vs.  CHEMICAL INDUSTRIES

INDO RAMA SYNTHETIC

Risk-Adjusted Performance

0 of 100

Very Weak

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.

CHEMICAL INDUSTRIES

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with INDO RAMA and CHEMICAL INDUSTRIES

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

The idea behind INDO RAMA SYNTHETIC and CHEMICAL INDUSTRIES 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.