Correlation Between Indo Tambangraya and Golden Eagle

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

Diversification Opportunities for Indo Tambangraya and Golden Eagle

-0.02

Correlation Coefficient

Indo Tambangraya  Golden Eagle

Good diversification

The 3 months correlation between Indo and Golden is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Indo Tambangraya Megah and Golden Eagle Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Eagle Energy 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 Golden Eagle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Eagle Energy has no effect on the direction of Indo Tambangraya i.e., Indo Tambangraya and Golden Eagle go up and down completely randomly.

Pair Corralation between Indo Tambangraya and Golden Eagle

Assuming the 90 days trading horizon Indo Tambangraya Megah is expected to under-perform the Golden Eagle. But the stock apears to be less risky and, when comparing its historical volatility, Indo Tambangraya Megah is 1.87 times less risky than Golden Eagle. The stock trades about -0.03 of its potential returns per unit of risk. The Golden Eagle Energy is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  76,000  in Golden Eagle Energy on September 29, 2024 and sell it today you would lose (1,500) from holding Golden Eagle Energy or give up 1.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Indo Tambangraya Megah  vs.  Golden Eagle Energy

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.

Golden Eagle Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Golden Eagle Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Golden Eagle 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 Golden Eagle

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

The idea behind Indo Tambangraya Megah and Golden Eagle Energy 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.