Correlation Between PT MNC and Tanah Laut

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

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

Diversification Opportunities for PT MNC and Tanah Laut

-0.24

Correlation Coefficient

PT MNC  Tanah Laut

Very good diversification

The 3 months correlation between IATA and Tanah is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding PT MNC Energy 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 PT MNC 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 PT MNC Energy 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 PT MNC i.e., PT MNC and Tanah Laut go up and down completely randomly.

Pair Corralation between PT MNC and Tanah Laut

Assuming the 90 days trading horizon PT MNC Energy is expected to under-perform the Tanah Laut. In addition to that, PT MNC is 2.04 times more volatile than Tanah Laut Tbk. It trades about -0.21 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

PT MNC Energy  vs.  Tanah Laut Tbk

PT MNC Energy

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PT MNC Energy are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, PT MNC 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 PT MNC and Tanah Laut

The main advantage of trading using opposite PT MNC and Tanah Laut positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT MNC 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 PT MNC Energy 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.