Correlation Between Indo Tambangraya and Harum Energy

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

Diversification Opportunities for Indo Tambangraya and Harum Energy

0.87

Correlation Coefficient

Indo Tambangraya  Harum Energy

Very poor diversification

The 3 months correlation between Indo and Harum is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Indo Tambangraya Megah and Harum Energy Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harum Energy Tbk 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 Harum Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harum Energy Tbk has no effect on the direction of Indo Tambangraya i.e., Indo Tambangraya and Harum Energy go up and down completely randomly.

Pair Corralation between Indo Tambangraya and Harum Energy

Assuming the 90 days trading horizon Indo Tambangraya Megah is expected to generate 0.56 times more return on investment than Harum Energy. However, Indo Tambangraya Megah is 1.79 times less risky than Harum Energy. It trades about -0.17 of its potential returns per unit of risk. Harum Energy Tbk is currently generating about -0.25 per unit of risk. If you would invest  2,670,000  in Indo Tambangraya Megah on December 30, 2024 and sell it today you would lose (375,000) from holding Indo Tambangraya Megah or give up 14.04% of portfolio value over 90 days.

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

Indo Tambangraya Megah  vs.  Harum Energy Tbk

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. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Harum Energy Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Harum Energy Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Indo Tambangraya and Harum Energy

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

The idea behind Indo Tambangraya Megah and Harum Energy 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.