Correlation Between Indo Tambangraya and Peabody Energy

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

By analyzing existing cross correlation between Indo Tambangraya Megah and Peabody Energy Corp, you can compare the effects of market volatilities on Indo Tambangraya and Peabody Energy 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 Tambangraya with a short position of Peabody Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indo Tambangraya and Peabody Energy.

Diversification Opportunities for Indo Tambangraya and Peabody Energy

0.67

Correlation Coefficient

Indo Tambangraya  Peabody Energy

Poor diversification

The 3 months correlation between Indo and Peabody is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Indo Tambangraya Megah and Peabody Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peabody Energy Corp and Indo Tambangraya 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 Tambangraya Megah are associated (or correlated) with Peabody Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peabody Energy Corp has no effect on the direction of Indo Tambangraya i.e., Indo Tambangraya and Peabody Energy go up and down completely randomly.

Pair Corralation between Indo Tambangraya and Peabody Energy

Assuming the 90 days horizon Indo Tambangraya Megah is expected to generate 0.95 times more return on investment than Peabody Energy. However, Indo Tambangraya Megah is 1.06 times less risky than Peabody Energy. It trades about -0.06 of its potential returns per unit of risk. Peabody Energy Corp is currently generating about -0.18 per unit of risk. If you would invest  335.00  in Indo Tambangraya Megah on December 28, 2024 and sell it today you would lose (50.00) from holding Indo Tambangraya Megah or give up 14.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.83%
Values	Daily Returns

Indo Tambangraya Megah  vs.  Peabody Energy Corp

Indo Tambangraya Megah

Risk-Adjusted Performance

Very Weak

Over the last 90 days Indo Tambangraya Megah has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Peabody Energy Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Peabody Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Indo Tambangraya and Peabody Energy

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

The idea behind Indo Tambangraya Megah and Peabody Energy Corp 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.