Correlation Between Indo Tambangraya and Baramulti Suksessarana

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

Diversification Opportunities for Indo Tambangraya and Baramulti Suksessarana

-0.43

Correlation Coefficient

Indo Tambangraya  Baramulti Suksessarana

Very good diversification

The 3 months correlation between Indo and Baramulti is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Indo Tambangraya Megah and Baramulti Suksessarana Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baramulti Suksessarana 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 Baramulti Suksessarana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baramulti Suksessarana has no effect on the direction of Indo Tambangraya i.e., Indo Tambangraya and Baramulti Suksessarana go up and down completely randomly.

Pair Corralation between Indo Tambangraya and Baramulti Suksessarana

Assuming the 90 days trading horizon Indo Tambangraya Megah is expected to under-perform the Baramulti Suksessarana. In addition to that, Indo Tambangraya is 1.28 times more volatile than Baramulti Suksessarana Tbk. It trades about -0.35 of its total potential returns per unit of risk. Baramulti Suksessarana Tbk is currently generating about 0.18 per unit of volatility. If you would invest  416,213  in Baramulti Suksessarana Tbk on October 16, 2024 and sell it today you would earn a total of  16,787  from holding Baramulti Suksessarana Tbk or generate 4.03% return on investment over 90 days.

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

Indo Tambangraya Megah  vs.  Baramulti Suksessarana Tbk

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.

Baramulti Suksessarana

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Baramulti Suksessarana Tbk are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Baramulti Suksessarana 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 Tambangraya and Baramulti Suksessarana

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

The idea behind Indo Tambangraya Megah and Baramulti Suksessarana 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.