Correlation Between Tanah Laut and Inter Delta

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

By analyzing existing cross correlation between Tanah Laut Tbk and Inter Delta Tbk, you can compare the effects of market volatilities on Tanah Laut and Inter Delta 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 Tanah Laut with a short position of Inter Delta. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tanah Laut and Inter Delta.

Diversification Opportunities for Tanah Laut and Inter Delta

0.28

Correlation Coefficient

Tanah Laut  Inter Delta

Modest diversification

The 3 months correlation between Tanah and Inter is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Tanah Laut Tbk and Inter Delta Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inter Delta Tbk and Tanah Laut 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 Tanah Laut Tbk are associated (or correlated) with Inter Delta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inter Delta Tbk has no effect on the direction of Tanah Laut i.e., Tanah Laut and Inter Delta go up and down completely randomly.

Pair Corralation between Tanah Laut and Inter Delta

Assuming the 90 days trading horizon Tanah Laut Tbk is expected to generate 1.79 times more return on investment than Inter Delta. However, Tanah Laut is 1.79 times more volatile than Inter Delta Tbk. It trades about 0.03 of its potential returns per unit of risk. Inter Delta Tbk is currently generating about -0.03 per unit of risk. If you would invest  8,300  in Tanah Laut Tbk on December 29, 2024 and sell it today you would lose (400.00) from holding Tanah Laut Tbk or give up 4.82% of portfolio value over 90 days.

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

Tanah Laut Tbk  vs.  Inter Delta Tbk

Tanah Laut Tbk

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tanah Laut Tbk are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Tanah Laut disclosed solid returns over the last few months and may actually be approaching a breakup point.

Inter Delta Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Inter Delta Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Tanah Laut and Inter Delta

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

The idea behind Tanah Laut Tbk and Inter Delta Tbk 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.