Correlation Between Indo Tambangraya and Petrosea Tbk

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

Diversification Opportunities for Indo Tambangraya and Petrosea Tbk

0.12

Correlation Coefficient

Indo Tambangraya  Petrosea Tbk

Average diversification

The 3 months correlation between Indo and Petrosea is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Indo Tambangraya Megah and Petrosea Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrosea 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 Petrosea Tbk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petrosea Tbk has no effect on the direction of Indo Tambangraya i.e., Indo Tambangraya and Petrosea Tbk go up and down completely randomly.

Pair Corralation between Indo Tambangraya and Petrosea Tbk

Assuming the 90 days trading horizon Indo Tambangraya is expected to generate 66.31 times less return on investment than Petrosea Tbk. But when comparing it to its historical volatility, Indo Tambangraya Megah is 4.16 times less risky than Petrosea Tbk. It trades about 0.01 of its potential returns per unit of risk. Petrosea Tbk is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,300,000  in Petrosea Tbk on September 3, 2024 and sell it today you would earn a total of  672,500  from holding Petrosea Tbk or generate 51.73% return on investment over 90 days.

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

Indo Tambangraya Megah  vs.  Petrosea 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.

Petrosea Tbk

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Petrosea Tbk are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Petrosea Tbk disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Indo Tambangraya and Petrosea Tbk

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

The idea behind Indo Tambangraya Megah and Petrosea 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.