Correlation Between Inter Delta and Tanah Laut

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

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

Diversification Opportunities for Inter Delta and Tanah Laut

0.06

Correlation Coefficient

Inter Delta  Tanah Laut

Significant diversification

The 3 months correlation between Inter and Tanah is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Inter Delta Tbk and Tanah Laut Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tanah Laut Tbk and Inter Delta 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 Inter Delta Tbk are associated (or correlated) with Tanah Laut. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tanah Laut Tbk has no effect on the direction of Inter Delta i.e., Inter Delta and Tanah Laut go up and down completely randomly.

Pair Corralation between Inter Delta and Tanah Laut

Assuming the 90 days trading horizon Inter Delta Tbk is expected to generate 1.99 times more return on investment than Tanah Laut. However, Inter Delta is 1.99 times more volatile than Tanah Laut Tbk. It trades about 0.05 of its potential returns per unit of risk. Tanah Laut Tbk is currently generating about -0.04 per unit of risk. If you would invest  14,500  in Inter Delta Tbk on October 7, 2024 and sell it today you would earn a total of  5,400  from holding Inter Delta Tbk or generate 37.24% return on investment over 90 days.

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

Inter Delta Tbk  vs.  Tanah Laut Tbk

Inter Delta Tbk

Risk-Adjusted Performance

0 of 100

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 conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Tanah Laut Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tanah Laut Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Tanah Laut 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 Inter Delta and Tanah Laut

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

The idea behind Inter Delta Tbk and Tanah Laut 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.