Correlation Between PT Indonesia and Lion Metal

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

Diversification Opportunities for PT Indonesia and Lion Metal

-0.84

Correlation Coefficient

PT Indonesia  Lion Metal

Pay attention - limited upside

The 3 months correlation between IPCC and Lion is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding PT Indonesia Kendaraan and Lion Metal Works in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lion Metal Works 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 Lion Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lion Metal Works has no effect on the direction of PT Indonesia i.e., PT Indonesia and Lion Metal go up and down completely randomly.

Pair Corralation between PT Indonesia and Lion Metal

Assuming the 90 days trading horizon PT Indonesia Kendaraan is expected to generate 0.36 times more return on investment than Lion Metal. However, PT Indonesia Kendaraan is 2.78 times less risky than Lion Metal. It trades about 0.11 of its potential returns per unit of risk. Lion Metal Works is currently generating about -0.13 per unit of risk. If you would invest  65,709  in PT Indonesia Kendaraan on September 13, 2024 and sell it today you would earn a total of  6,291  from holding PT Indonesia Kendaraan or generate 9.57% return on investment over 90 days.

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

PT Indonesia Kendaraan  vs.  Lion Metal Works

PT Indonesia Kendaraan

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PT Indonesia Kendaraan are ranked lower than 9 (%) 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 January 2025.

Lion Metal Works

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lion Metal Works 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 January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with PT Indonesia and Lion Metal

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

The idea behind PT Indonesia Kendaraan and Lion Metal Works 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.