Correlation Between Air Transport and PT Indosat

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

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

Diversification Opportunities for Air Transport and PT Indosat

-0.41

Correlation Coefficient

Air Transport  PT Indosat

Very good diversification

The 3 months correlation between Air and IDO1 is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Air Transport Services and PT Indosat Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Indosat Tbk and Air Transport 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 Transport Services are associated (or correlated) with PT Indosat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Indosat Tbk has no effect on the direction of Air Transport i.e., Air Transport and PT Indosat go up and down completely randomly.

Pair Corralation between Air Transport and PT Indosat

Assuming the 90 days horizon Air Transport Services is expected to generate 0.32 times more return on investment than PT Indosat. However, Air Transport Services is 3.12 times less risky than PT Indosat. It trades about 0.23 of its potential returns per unit of risk. PT Indosat Tbk is currently generating about 0.02 per unit of risk. If you would invest  1,370  in Air Transport Services on October 8, 2024 and sell it today you would earn a total of  750.00  from holding Air Transport Services or generate 54.74% return on investment over 90 days.

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

Air Transport Services  vs.  PT Indosat Tbk

Air Transport Services

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Air Transport Services are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Air Transport reported solid returns over the last few months and may actually be approaching a breakup point.

PT Indosat Tbk

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PT Indosat Tbk are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, PT Indosat may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Air Transport and PT Indosat

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

The idea behind Air Transport Services and PT Indosat Tbk 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.