Correlation Between Vale Indonesia and Medco Energi
Can any of the company-specific risk be diversified away by investing in both Vale Indonesia and Medco Energi 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 Medco Energi 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 Medco Energi Internasional, you can compare the effects of market volatilities on Vale Indonesia and Medco Energi 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 Medco Energi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale Indonesia and Medco Energi.
Diversification Opportunities for Vale Indonesia and Medco Energi
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vale and Medco is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Vale Indonesia Tbk and Medco Energi Internasional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medco Energi Interna 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 Medco Energi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medco Energi Interna has no effect on the direction of Vale Indonesia i.e., Vale Indonesia and Medco Energi go up and down completely randomly.
Pair Corralation between Vale Indonesia and Medco Energi
Assuming the 90 days trading horizon Vale Indonesia Tbk is expected to under-perform the Medco Energi. In addition to that, Vale Indonesia is 1.34 times more volatile than Medco Energi Internasional. It trades about -0.13 of its total potential returns per unit of risk. Medco Energi Internasional is currently generating about -0.01 per unit of volatility. If you would invest 105,000 in Medco Energi Internasional on December 1, 2024 and sell it today you would lose (3,000) from holding Medco Energi Internasional or give up 2.86% 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. Medco Energi Internasional
Performance |
Timeline |
Vale Indonesia Tbk |
Medco Energi Interna |
Vale Indonesia and Medco Energi Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Vale Indonesia and Medco Energi
The main advantage of trading using opposite Vale Indonesia and Medco Energi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vale Indonesia position performs unexpectedly, Medco Energi 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 Medco Energi will offset losses from the drop in Medco Energi's long position.Vale Indonesia vs. Timah Persero Tbk | Vale Indonesia vs. Aneka Tambang Persero | Vale Indonesia vs. Bukit Asam Tbk | Vale Indonesia vs. Perusahaan Gas Negara |
Medco Energi vs. Vale Indonesia Tbk | Medco Energi vs. Timah Persero Tbk | Medco Energi vs. Perusahaan Gas Negara | Medco Energi vs. Bukit Asam Tbk |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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