Correlation Between Harum Energy and Exploitasi Energi

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

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

Diversification Opportunities for Harum Energy and Exploitasi Energi

-0.44

Correlation Coefficient

Harum Energy  Exploitasi Energi

Very good diversification

The 3 months correlation between Harum and Exploitasi is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Harum Energy Tbk and Exploitasi Energi Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exploitasi Energi and Harum Energy 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 Harum Energy Tbk are associated (or correlated) with Exploitasi Energi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exploitasi Energi has no effect on the direction of Harum Energy i.e., Harum Energy and Exploitasi Energi go up and down completely randomly.

Pair Corralation between Harum Energy and Exploitasi Energi

Assuming the 90 days trading horizon Harum Energy Tbk is expected to generate 0.38 times more return on investment than Exploitasi Energi. However, Harum Energy Tbk is 2.66 times less risky than Exploitasi Energi. It trades about -0.02 of its potential returns per unit of risk. Exploitasi Energi Indonesia is currently generating about -0.01 per unit of risk. If you would invest  164,500  in Harum Energy Tbk on September 14, 2024 and sell it today you would lose (51,000) from holding Harum Energy Tbk or give up 31.0% of portfolio value over 90 days.

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

Harum Energy Tbk  vs.  Exploitasi Energi Indonesia

Harum Energy Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Harum Energy Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Exploitasi Energi

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Exploitasi Energi Indonesia are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Exploitasi Energi disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Harum Energy and Exploitasi Energi

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

The idea behind Harum Energy Tbk and Exploitasi Energi Indonesia 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.