Correlation Between PT Indonesia and Jembo Cable

Can any of the company-specific risk be diversified away by investing in both PT Indonesia and Jembo Cable 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 Jembo Cable 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 Jembo Cable, you can compare the effects of market volatilities on PT Indonesia and Jembo Cable 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 Jembo Cable. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Indonesia and Jembo Cable.

Diversification Opportunities for PT Indonesia and Jembo Cable

0.16

Correlation Coefficient

PT Indonesia  Jembo Cable

Average diversification

The 3 months correlation between IPCC and Jembo is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding PT Indonesia Kendaraan and Jembo Cable in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jembo Cable 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 Jembo Cable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jembo Cable has no effect on the direction of PT Indonesia i.e., PT Indonesia and Jembo Cable go up and down completely randomly.

Pair Corralation between PT Indonesia and Jembo Cable

Assuming the 90 days trading horizon PT Indonesia is expected to generate 2.43 times less return on investment than Jembo Cable. But when comparing it to its historical volatility, PT Indonesia Kendaraan is 3.46 times less risky than Jembo Cable. It trades about 0.02 of its potential returns per unit of risk. Jembo Cable is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  61,500  in Jembo Cable on December 2, 2024 and sell it today you would lose (1,000.00) from holding Jembo Cable or give up 1.63% of portfolio value over 90 days.

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

PT Indonesia Kendaraan  vs.  Jembo Cable

PT Indonesia Kendaraan

Risk-Adjusted Performance

Very Weak

Over the last 90 days PT Indonesia Kendaraan has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, PT Indonesia is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Jembo Cable

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jembo Cable are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Jembo Cable 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 Jembo Cable

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

The idea behind PT Indonesia Kendaraan and Jembo Cable 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.