Correlation Between Fortune Indonesia and Tanah Laut

Can any of the company-specific risk be diversified away by investing in both Fortune Indonesia and Tanah Laut 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 Tanah Laut 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 Tanah Laut Tbk, you can compare the effects of market volatilities on Fortune Indonesia and Tanah Laut 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 Tanah Laut. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortune Indonesia and Tanah Laut.

Diversification Opportunities for Fortune Indonesia and Tanah Laut

-0.24

Correlation Coefficient

Fortune Indonesia  Tanah Laut

Very good diversification

The 3 months correlation between Fortune and Tanah is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Fortune Indonesia Tbk and Tanah Laut Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tanah Laut Tbk 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 Tanah Laut. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tanah Laut Tbk has no effect on the direction of Fortune Indonesia i.e., Fortune Indonesia and Tanah Laut go up and down completely randomly.

Pair Corralation between Fortune Indonesia and Tanah Laut

Assuming the 90 days trading horizon Fortune Indonesia Tbk is expected to under-perform the Tanah Laut. In addition to that, Fortune Indonesia is 2.5 times more volatile than Tanah Laut Tbk. It trades about -0.38 of its total potential returns per unit of risk. Tanah Laut Tbk is currently generating about -0.14 per unit of volatility. If you would invest  8,400  in Tanah Laut Tbk on October 7, 2024 and sell it today you would lose (400.00) from holding Tanah Laut Tbk or give up 4.76% of portfolio value over 90 days.

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

Fortune Indonesia Tbk  vs.  Tanah Laut Tbk

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.

Tanah Laut Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tanah Laut Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Tanah Laut 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 Fortune Indonesia and Tanah Laut

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

The idea behind Fortune Indonesia Tbk and Tanah Laut 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.