Correlation Between Indonesia Energy and Nine Energy

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

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

Diversification Opportunities for Indonesia Energy and Nine Energy

0.41

Correlation Coefficient

Indonesia Energy  Nine Energy

Very weak diversification

The 3 months correlation between Indonesia and Nine is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Indonesia Energy and Nine Energy Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nine Energy Service and Indonesia Energy 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 Indonesia Energy are associated (or correlated) with Nine Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nine Energy Service has no effect on the direction of Indonesia Energy i.e., Indonesia Energy and Nine Energy go up and down completely randomly.

Pair Corralation between Indonesia Energy and Nine Energy

Given the investment horizon of 90 days Indonesia Energy is expected to generate 4.91 times less return on investment than Nine Energy. But when comparing it to its historical volatility, Indonesia Energy is 1.76 times less risky than Nine Energy. It trades about 0.02 of its potential returns per unit of risk. Nine Energy Service is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  99.00  in Nine Energy Service on December 29, 2024 and sell it today you would earn a total of  16.00  from holding Nine Energy Service or generate 16.16% return on investment over 90 days.

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

Indonesia Energy  vs.  Nine Energy Service

Indonesia Energy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Indonesia Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Indonesia Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Nine Energy Service

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nine Energy Service are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Nine Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Indonesia Energy and Nine Energy

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

The idea behind Indonesia Energy and Nine Energy Service 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.