Correlation Between Fortune Indonesia and Energi Mega

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

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

Diversification Opportunities for Fortune Indonesia and Energi Mega

0.53

Correlation Coefficient

Fortune Indonesia  Energi Mega

Very weak diversification

The 3 months correlation between Fortune and Energi is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Fortune Indonesia Tbk and Energi Mega Persada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energi Mega Persada and Fortune Indonesia 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 Fortune Indonesia Tbk are associated (or correlated) with Energi Mega. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energi Mega Persada has no effect on the direction of Fortune Indonesia i.e., Fortune Indonesia and Energi Mega go up and down completely randomly.

Pair Corralation between Fortune Indonesia and Energi Mega

Assuming the 90 days trading horizon Fortune Indonesia Tbk is expected to generate 1.89 times more return on investment than Energi Mega. However, Fortune Indonesia is 1.89 times more volatile than Energi Mega Persada. It trades about 0.14 of its potential returns per unit of risk. Energi Mega Persada is currently generating about -0.01 per unit of risk. If you would invest  22,600  in Fortune Indonesia Tbk on September 5, 2024 and sell it today you would earn a total of  444,400  from holding Fortune Indonesia Tbk or generate 1966.37% return on investment over 90 days.

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

Fortune Indonesia Tbk  vs.  Energi Mega Persada

Fortune Indonesia Tbk

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fortune Indonesia Tbk are ranked lower than 7 (%) 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.

Energi Mega Persada

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Energi Mega Persada are ranked lower than 5 (%) 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.

Pair Trading with Fortune Indonesia and Energi Mega

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

The idea behind Fortune Indonesia Tbk and Energi Mega Persada 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.