Correlation Between PT Indonesia and Sumber Energi

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

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

Diversification Opportunities for PT Indonesia and Sumber Energi

-0.63

Correlation Coefficient

PT Indonesia  Sumber Energi

Excellent diversification

The 3 months correlation between IPCC and Sumber is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding PT Indonesia Kendaraan and Sumber Energi Andalan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumber Energi Andalan and PT 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 PT Indonesia Kendaraan are associated (or correlated) with Sumber Energi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumber Energi Andalan has no effect on the direction of PT Indonesia i.e., PT Indonesia and Sumber Energi go up and down completely randomly.

Pair Corralation between PT Indonesia and Sumber Energi

Assuming the 90 days trading horizon PT Indonesia Kendaraan is expected to under-perform the Sumber Energi. But the stock apears to be less risky and, when comparing its historical volatility, PT Indonesia Kendaraan is 3.57 times less risky than Sumber Energi. The stock trades about -0.14 of its potential returns per unit of risk. The Sumber Energi Andalan is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  76,000  in Sumber Energi Andalan on October 7, 2024 and sell it today you would earn a total of  3,000  from holding Sumber Energi Andalan or generate 3.95% return on investment over 90 days.

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

PT Indonesia Kendaraan  vs.  Sumber Energi Andalan

PT Indonesia Kendaraan

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PT Indonesia Kendaraan are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, PT Indonesia may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Sumber Energi Andalan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sumber Energi Andalan has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Sumber Energi 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 PT Indonesia and Sumber Energi

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

The idea behind PT Indonesia Kendaraan and Sumber Energi Andalan 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.