Correlation Between PT Indonesia and Supreme Cable

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

Diversification Opportunities for PT Indonesia and Supreme Cable

-0.04

Correlation Coefficient

PT Indonesia  Supreme Cable

Good diversification

The 3 months correlation between IPCC and Supreme is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding PT Indonesia Kendaraan and Supreme Cable Manufacturing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Supreme Cable Manufa 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 Supreme Cable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Supreme Cable Manufa has no effect on the direction of PT Indonesia i.e., PT Indonesia and Supreme Cable go up and down completely randomly.

Pair Corralation between PT Indonesia and Supreme Cable

Assuming the 90 days trading horizon PT Indonesia Kendaraan is expected to generate 0.63 times more return on investment than Supreme Cable. However, PT Indonesia Kendaraan is 1.6 times less risky than Supreme Cable. It trades about 0.02 of its potential returns per unit of risk. Supreme Cable Manufacturing is currently generating about -0.03 per unit of risk. If you would invest  71,000  in PT Indonesia Kendaraan on December 2, 2024 and sell it today you would earn a total of  500.00  from holding PT Indonesia Kendaraan or generate 0.7% return on investment over 90 days.

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

PT Indonesia Kendaraan  vs.  Supreme Cable Manufacturing

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 latest stock price mess, may contribute to short-term losses for the institutional investors.

Supreme Cable Manufa

Risk-Adjusted Performance

Very Weak

Over the last 90 days Supreme Cable Manufacturing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Supreme 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 Supreme Cable

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

The idea behind PT Indonesia Kendaraan and Supreme Cable Manufacturing 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.