Correlation Between Indo Tambangraya and Asuransi Kresna

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

Diversification Opportunities for Indo Tambangraya and Asuransi Kresna

-0.32

Correlation Coefficient

Indo Tambangraya  Asuransi Kresna

Very good diversification

The 3 months correlation between Indo and Asuransi is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Indo Tambangraya Megah and Asuransi Kresna Mitra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asuransi Kresna Mitra 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 Asuransi Kresna. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asuransi Kresna Mitra has no effect on the direction of Indo Tambangraya i.e., Indo Tambangraya and Asuransi Kresna go up and down completely randomly.

Pair Corralation between Indo Tambangraya and Asuransi Kresna

Assuming the 90 days trading horizon Indo Tambangraya Megah is expected to generate 0.21 times more return on investment than Asuransi Kresna. However, Indo Tambangraya Megah is 4.75 times less risky than Asuransi Kresna. It trades about 0.05 of its potential returns per unit of risk. Asuransi Kresna Mitra is currently generating about -0.06 per unit of risk. If you would invest  2,197,032  in Indo Tambangraya Megah on September 28, 2024 and sell it today you would earn a total of  332,968  from holding Indo Tambangraya Megah or generate 15.16% return on investment over 90 days.

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

Indo Tambangraya Megah  vs.  Asuransi Kresna Mitra

Indo Tambangraya Megah

Risk-Adjusted Performance

0 of 100

Very Weak

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

Asuransi Kresna Mitra

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Asuransi Kresna Mitra are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Asuransi Kresna disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Indo Tambangraya and Asuransi Kresna

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

The idea behind Indo Tambangraya Megah and Asuransi Kresna Mitra 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.