Correlation Between Inocycle Technology and Vale Indonesia

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

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

Diversification Opportunities for Inocycle Technology and Vale Indonesia

-0.52

Correlation Coefficient

Inocycle Technology  Vale Indonesia

Excellent diversification

The 3 months correlation between Inocycle and Vale is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Inocycle Technology Tbk and Vale Indonesia Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale Indonesia Tbk and Inocycle Technology 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 Inocycle Technology Tbk are associated (or correlated) with Vale Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vale Indonesia Tbk has no effect on the direction of Inocycle Technology i.e., Inocycle Technology and Vale Indonesia go up and down completely randomly.

Pair Corralation between Inocycle Technology and Vale Indonesia

Assuming the 90 days trading horizon Inocycle Technology Tbk is expected to generate 1.7 times more return on investment than Vale Indonesia. However, Inocycle Technology is 1.7 times more volatile than Vale Indonesia Tbk. It trades about 0.04 of its potential returns per unit of risk. Vale Indonesia Tbk is currently generating about -0.04 per unit of risk. If you would invest  9,500  in Inocycle Technology Tbk on September 2, 2024 and sell it today you would earn a total of  500.00  from holding Inocycle Technology Tbk or generate 5.26% return on investment over 90 days.

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

Inocycle Technology Tbk  vs.  Vale Indonesia Tbk

Inocycle Technology Tbk

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Inocycle Technology Tbk are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Inocycle Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with Inocycle Technology and Vale Indonesia

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

The idea behind Inocycle Technology Tbk and Vale Indonesia 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.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.