Correlation Between Indo Tambangraya and Natural Resource

Can any of the company-specific risk be diversified away by investing in both Indo Tambangraya and Natural Resource 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 Natural Resource 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 Natural Resource Partners, you can compare the effects of market volatilities on Indo Tambangraya and Natural Resource 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 Natural Resource. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indo Tambangraya and Natural Resource.

Diversification Opportunities for Indo Tambangraya and Natural Resource

-0.04

Correlation Coefficient

Indo Tambangraya  Natural Resource

Good diversification

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

Pair Corralation between Indo Tambangraya and Natural Resource

Assuming the 90 days horizon Indo Tambangraya Megah is expected to under-perform the Natural Resource. In addition to that, Indo Tambangraya is 1.17 times more volatile than Natural Resource Partners. It trades about -0.06 of its total potential returns per unit of risk. Natural Resource Partners is currently generating about 0.0 per unit of volatility. If you would invest  10,663  in Natural Resource Partners on December 28, 2024 and sell it today you would lose (163.00) from holding Natural Resource Partners or give up 1.53% of portfolio value over 90 days.

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

Indo Tambangraya Megah  vs.  Natural Resource Partners

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.

Natural Resource Partners

Risk-Adjusted Performance

Very Weak

Over the last 90 days Natural Resource Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Natural Resource is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Indo Tambangraya and Natural Resource

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

The idea behind Indo Tambangraya Megah and Natural Resource Partners 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.