Correlation Between Indo Tambangraya and Samindo Resources

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

Diversification Opportunities for Indo Tambangraya and Samindo Resources

0.62

Correlation Coefficient

Indo Tambangraya  Samindo Resources

Poor diversification

The 3 months correlation between Indo and Samindo is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Indo Tambangraya Megah and Samindo Resources Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samindo Resources 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 Samindo Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samindo Resources Tbk has no effect on the direction of Indo Tambangraya i.e., Indo Tambangraya and Samindo Resources go up and down completely randomly.

Pair Corralation between Indo Tambangraya and Samindo Resources

Assuming the 90 days trading horizon Indo Tambangraya Megah is expected to under-perform the Samindo Resources. But the stock apears to be less risky and, when comparing its historical volatility, Indo Tambangraya Megah is 2.73 times less risky than Samindo Resources. The stock trades about -0.29 of its potential returns per unit of risk. The Samindo Resources Tbk is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  160,000  in Samindo Resources Tbk on September 27, 2024 and sell it today you would earn a total of  13,000  from holding Samindo Resources Tbk or generate 8.13% return on investment over 90 days.

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

Indo Tambangraya Megah  vs.  Samindo Resources 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.

Samindo Resources Tbk

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Samindo Resources Tbk are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Samindo Resources disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Indo Tambangraya and Samindo Resources

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

The idea behind Indo Tambangraya Megah and Samindo Resources 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.