Correlation Between Indo Pureco and PAM Mineral

Can any of the company-specific risk be diversified away by investing in both Indo Pureco and PAM Mineral 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 Indo Pureco and PAM Mineral into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Indo Pureco Pratama and PAM Mineral Tbk, you can compare the effects of market volatilities on Indo Pureco and PAM Mineral 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 Indo Pureco with a short position of PAM Mineral. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indo Pureco and PAM Mineral.

Diversification Opportunities for Indo Pureco and PAM Mineral

0.0

Correlation Coefficient

Indo Pureco  PAM Mineral

Pay attention - limited upside

The 3 months correlation between Indo and PAM is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Indo Pureco Pratama and PAM Mineral Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PAM Mineral Tbk and Indo Pureco 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 Indo Pureco Pratama are associated (or correlated) with PAM Mineral. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PAM Mineral Tbk has no effect on the direction of Indo Pureco i.e., Indo Pureco and PAM Mineral go up and down completely randomly.

Pair Corralation between Indo Pureco and PAM Mineral

Assuming the 90 days trading horizon Indo Pureco Pratama is expected to under-perform the PAM Mineral. But the stock apears to be less risky and, when comparing its historical volatility, Indo Pureco Pratama is 1.26 times less risky than PAM Mineral. The stock trades about -0.07 of its potential returns per unit of risk. The PAM Mineral Tbk is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  18,341  in PAM Mineral Tbk on October 11, 2024 and sell it today you would earn a total of  7,659  from holding PAM Mineral Tbk or generate 41.76% return on investment over 90 days.

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

Indo Pureco Pratama  vs.  PAM Mineral Tbk

Indo Pureco Pratama

Risk-Adjusted Performance

0 of 100

Very Weak

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

PAM Mineral Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PAM Mineral Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, PAM Mineral 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 Indo Pureco and PAM Mineral

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

The idea behind Indo Pureco Pratama and PAM Mineral Tbk 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.