Correlation Between Vale Indonesia and Jakarta Int

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

Diversification Opportunities for Vale Indonesia and Jakarta Int

-0.46

Correlation Coefficient

Vale Indonesia  Jakarta Int

Very good diversification

The 3 months correlation between Vale and Jakarta is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Vale Indonesia Tbk and Jakarta Int Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jakarta Int Hotels 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 Jakarta Int. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jakarta Int Hotels has no effect on the direction of Vale Indonesia i.e., Vale Indonesia and Jakarta Int go up and down completely randomly.

Pair Corralation between Vale Indonesia and Jakarta Int

Assuming the 90 days trading horizon Vale Indonesia Tbk is expected to under-perform the Jakarta Int. But the stock apears to be less risky and, when comparing its historical volatility, Vale Indonesia Tbk is 5.21 times less risky than Jakarta Int. The stock trades about -0.04 of its potential returns per unit of risk. The Jakarta Int Hotels is currently generating about 0.44 of returns per unit of risk over similar time horizon. If you would invest  33,200  in Jakarta Int Hotels on August 31, 2024 and sell it today you would earn a total of  263,800  from holding Jakarta Int Hotels or generate 794.58% return on investment over 90 days.

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

Vale Indonesia Tbk  vs.  Jakarta Int Hotels

Vale Indonesia Tbk

Risk-Adjusted Performance

0 of 100

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 quite persistent forward-looking signals, Vale Indonesia is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Jakarta Int Hotels

Risk-Adjusted Performance

34 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Jakarta Int Hotels are ranked lower than 34 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Jakarta Int disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vale Indonesia and Jakarta Int

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

The idea behind Vale Indonesia Tbk and Jakarta Int Hotels 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..