Correlation Between Air Lease and PT Indo

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

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

Diversification Opportunities for Air Lease and PT Indo

0.67

Correlation Coefficient

Air Lease  PT Indo

Poor diversification

The 3 months correlation between Air and 3IB is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Air Lease and PT Indo Tambangraya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Indo Tambangraya and Air Lease 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 Air Lease are associated (or correlated) with PT Indo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Indo Tambangraya has no effect on the direction of Air Lease i.e., Air Lease and PT Indo go up and down completely randomly.

Pair Corralation between Air Lease and PT Indo

Assuming the 90 days trading horizon Air Lease is expected to generate 1.89 times less return on investment than PT Indo. But when comparing it to its historical volatility, Air Lease is 1.73 times less risky than PT Indo. It trades about 0.09 of its potential returns per unit of risk. PT Indo Tambangraya is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  140.00  in PT Indo Tambangraya on October 9, 2024 and sell it today you would earn a total of  13.00  from holding PT Indo Tambangraya or generate 9.29% return on investment over 90 days.

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

Air Lease  vs.  PT Indo Tambangraya

Air Lease

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Lease are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Air Lease reported solid returns over the last few months and may actually be approaching a breakup point.

PT Indo Tambangraya

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PT Indo Tambangraya are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, PT Indo may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Air Lease and PT Indo

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

The idea behind Air Lease and PT Indo Tambangraya 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.

Check out your portfolio center.

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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.