Correlation Between Vale Indonesia and Maming Enam

Can any of the company-specific risk be diversified away by investing in both Vale Indonesia and Maming Enam 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 Vale Indonesia and Maming Enam into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Vale Indonesia and Maming Enam

0.7

Correlation Coefficient

Vale Indonesia  Maming Enam

Poor diversification

The 3 months correlation between Vale and Maming is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Vale Indonesia Tbk and Maming Enam Sembilan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maming Enam Sembilan and Vale 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 Vale Indonesia Tbk are associated (or correlated) with Maming Enam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maming Enam Sembilan has no effect on the direction of Vale Indonesia i.e., Vale Indonesia and Maming Enam go up and down completely randomly.

Pair Corralation between Vale Indonesia and Maming Enam

Assuming the 90 days trading horizon Vale Indonesia Tbk is expected to under-perform the Maming Enam. But the stock apears to be less risky and, when comparing its historical volatility, Vale Indonesia Tbk is 1.36 times less risky than Maming Enam. The stock trades about -0.19 of its potential returns per unit of risk. The Maming Enam Sembilan is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  24,200  in Maming Enam Sembilan on December 30, 2024 and sell it today you would lose (6,800) from holding Maming Enam Sembilan or give up 28.1% of portfolio value over 90 days.

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

Vale Indonesia Tbk  vs.  Maming Enam Sembilan

Vale Indonesia Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vale Indonesia 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 April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Maming Enam Sembilan

Risk-Adjusted Performance

Very Weak

Over the last 90 days Maming Enam Sembilan 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 April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Vale Indonesia and Maming Enam

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

The idea behind Vale Indonesia Tbk and Maming Enam Sembilan 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.