Correlation Between Indo Kordsa and PT Temas

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

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

Diversification Opportunities for Indo Kordsa and PT Temas

0.01

Correlation Coefficient

Indo Kordsa  PT Temas

Significant diversification

The 3 months correlation between Indo and TMAS is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Indo Kordsa Tbk and PT Temas Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Temas Tbk and Indo Kordsa 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 Kordsa Tbk are associated (or correlated) with PT Temas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Temas Tbk has no effect on the direction of Indo Kordsa i.e., Indo Kordsa and PT Temas go up and down completely randomly.

Pair Corralation between Indo Kordsa and PT Temas

Assuming the 90 days trading horizon Indo Kordsa Tbk is expected to generate 0.56 times more return on investment than PT Temas. However, Indo Kordsa Tbk is 1.8 times less risky than PT Temas. It trades about -0.02 of its potential returns per unit of risk. PT Temas Tbk is currently generating about -0.01 per unit of risk. If you would invest  590,000  in Indo Kordsa Tbk on December 20, 2024 and sell it today you would lose (10,000) from holding Indo Kordsa Tbk or give up 1.69% of portfolio value over 90 days.

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

Indo Kordsa Tbk  vs.  PT Temas Tbk

Indo Kordsa Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Indo Kordsa Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Indo Kordsa is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

PT Temas Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days PT Temas Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, PT Temas is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Indo Kordsa and PT Temas

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

The idea behind Indo Kordsa Tbk and PT Temas 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.