Correlation Between Cita Mineral and PAM Mineral

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

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

Diversification Opportunities for Cita Mineral and PAM Mineral

0.68

Correlation Coefficient

Cita Mineral  PAM Mineral

Poor diversification

The 3 months correlation between Cita and PAM is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Cita Mineral Investindo and PAM Mineral Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PAM Mineral Tbk and Cita Mineral 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 Cita Mineral Investindo are associated (or correlated) with PAM Mineral. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PAM Mineral Tbk has no effect on the direction of Cita Mineral i.e., Cita Mineral and PAM Mineral go up and down completely randomly.

Pair Corralation between Cita Mineral and PAM Mineral

Assuming the 90 days trading horizon Cita Mineral Investindo is expected to generate 1.69 times more return on investment than PAM Mineral. However, Cita Mineral is 1.69 times more volatile than PAM Mineral Tbk. It trades about 0.17 of its potential returns per unit of risk. PAM Mineral Tbk is currently generating about 0.07 per unit of risk. If you would invest  249,000  in Cita Mineral Investindo on September 14, 2024 and sell it today you would earn a total of  111,000  from holding Cita Mineral Investindo or generate 44.58% return on investment over 90 days.

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

Cita Mineral Investindo  vs.  PAM Mineral Tbk

Cita Mineral Investindo

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cita Mineral Investindo are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Cita Mineral disclosed solid returns over the last few months and may actually be approaching a breakup point.

PAM Mineral Tbk

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PAM Mineral Tbk are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, PAM Mineral may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Cita Mineral and PAM Mineral

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

The idea behind Cita Mineral Investindo and PAM Mineral 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.