Correlation Between PT Indosat and UNITED RENTALS

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

Diversification Opportunities for PT Indosat and UNITED RENTALS

0.53

Correlation Coefficient

PT Indosat  UNITED RENTALS

Very weak diversification

The 3 months correlation between IDO1 and UNITED is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding PT Indosat Tbk and UNITED RENTALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNITED RENTALS 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 UNITED RENTALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNITED RENTALS has no effect on the direction of PT Indosat i.e., PT Indosat and UNITED RENTALS go up and down completely randomly.

Pair Corralation between PT Indosat and UNITED RENTALS

Assuming the 90 days trading horizon PT Indosat Tbk is expected to generate 9.39 times more return on investment than UNITED RENTALS. However, PT Indosat is 9.39 times more volatile than UNITED RENTALS. It trades about 0.02 of its potential returns per unit of risk. UNITED RENTALS is currently generating about -0.09 per unit of risk. If you would invest  16.00  in PT Indosat Tbk on December 28, 2024 and sell it today you would lose (9.70) from holding PT Indosat Tbk or give up 60.62% of portfolio value over 90 days.

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

PT Indosat Tbk  vs.  UNITED RENTALS

PT Indosat Tbk

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PT Indosat Tbk are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PT Indosat reported solid returns over the last few months and may actually be approaching a breakup point.

UNITED RENTALS

Risk-Adjusted Performance

Very Weak

Over the last 90 days UNITED RENTALS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with PT Indosat and UNITED RENTALS

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

The idea behind PT Indosat Tbk and UNITED RENTALS 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 CEOs Directory module to screen CEOs from public companies around the world.