Correlation Between PT Indonesia and Pelita Samudera

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

Diversification Opportunities for PT Indonesia and Pelita Samudera

-0.42

Correlation Coefficient

PT Indonesia  Pelita Samudera

Very good diversification

The 3 months correlation between IPCC and Pelita is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding PT Indonesia Kendaraan and Pelita Samudera Shipping in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pelita Samudera Shipping 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 Pelita Samudera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pelita Samudera Shipping has no effect on the direction of PT Indonesia i.e., PT Indonesia and Pelita Samudera go up and down completely randomly.

Pair Corralation between PT Indonesia and Pelita Samudera

Assuming the 90 days trading horizon PT Indonesia Kendaraan is expected to generate 0.98 times more return on investment than Pelita Samudera. However, PT Indonesia Kendaraan is 1.02 times less risky than Pelita Samudera. It trades about 0.11 of its potential returns per unit of risk. Pelita Samudera Shipping is currently generating about -0.11 per unit of risk. If you would invest  70,500  in PT Indonesia Kendaraan on December 29, 2024 and sell it today you would earn a total of  7,000  from holding PT Indonesia Kendaraan or generate 9.93% return on investment over 90 days.

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

PT Indonesia Kendaraan  vs.  Pelita Samudera Shipping

PT Indonesia Kendaraan

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PT Indonesia Kendaraan are ranked lower than 8 (%) 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 April 2025.

Pelita Samudera Shipping

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pelita Samudera Shipping has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with PT Indonesia and Pelita Samudera

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

The idea behind PT Indonesia Kendaraan and Pelita Samudera Shipping 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.