Correlation Between PT Indosat and PNC Financial

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

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

Diversification Opportunities for PT Indosat and PNC Financial

0.69

Correlation Coefficient

PT Indosat  PNC Financial

Poor diversification

The 3 months correlation between IDO1 and PNC is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding PT Indosat Tbk and The PNC Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PNC Financial and PT Indosat 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 Indosat Tbk are associated (or correlated) with PNC Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PNC Financial has no effect on the direction of PT Indosat i.e., PT Indosat and PNC Financial go up and down completely randomly.

Pair Corralation between PT Indosat and PNC Financial

Assuming the 90 days trading horizon PT Indosat Tbk is expected to generate 10.78 times more return on investment than PNC Financial. However, PT Indosat is 10.78 times more volatile than The PNC Financial. It trades about 0.0 of its potential returns per unit of risk. The PNC Financial is currently generating about -0.15 per unit of risk. If you would invest  13.00  in PT Indosat Tbk on December 25, 2024 and sell it today you would lose (7.50) from holding PT Indosat Tbk or give up 57.69% of portfolio value over 90 days.

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

PT Indosat Tbk  vs.  The PNC Financial

PT Indosat Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days PT Indosat Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PT Indosat is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

PNC Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days The PNC Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with PT Indosat and PNC Financial

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

The idea behind PT Indosat Tbk and The PNC Financial 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.