Correlation Between Energi Mega and Fortune Indonesia

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

By analyzing existing cross correlation between Energi Mega Persada and Fortune Indonesia Tbk, you can compare the effects of market volatilities on Energi Mega and Fortune Indonesia 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 Energi Mega with a short position of Fortune Indonesia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energi Mega and Fortune Indonesia.

Diversification Opportunities for Energi Mega and Fortune Indonesia

0.57

Correlation Coefficient

Energi Mega  Fortune Indonesia

Very weak diversification

The 3 months correlation between Energi and Fortune is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Energi Mega Persada and Fortune Indonesia Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortune Indonesia Tbk and Energi Mega 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 Energi Mega Persada are associated (or correlated) with Fortune Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortune Indonesia Tbk has no effect on the direction of Energi Mega i.e., Energi Mega and Fortune Indonesia go up and down completely randomly.

Pair Corralation between Energi Mega and Fortune Indonesia

Assuming the 90 days trading horizon Energi Mega is expected to generate 3.68 times less return on investment than Fortune Indonesia. But when comparing it to its historical volatility, Energi Mega Persada is 2.31 times less risky than Fortune Indonesia. It trades about 0.09 of its potential returns per unit of risk. Fortune Indonesia Tbk is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  257,000  in Fortune Indonesia Tbk on September 1, 2024 and sell it today you would earn a total of  208,000  from holding Fortune Indonesia Tbk or generate 80.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Energi Mega Persada  vs.  Fortune Indonesia Tbk

Energi Mega Persada

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Energi Mega Persada are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Energi Mega disclosed solid returns over the last few months and may actually be approaching a breakup point.

Fortune Indonesia Tbk

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fortune Indonesia Tbk are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Fortune Indonesia disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Energi Mega and Fortune Indonesia

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

The idea behind Energi Mega Persada and Fortune Indonesia 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.

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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.