Correlation Between Resource Alam and Exploitasi Energi

Can any of the company-specific risk be diversified away by investing in both Resource Alam and Exploitasi Energi 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 Resource Alam and Exploitasi Energi into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Resource Alam Indonesia and Exploitasi Energi Indonesia, you can compare the effects of market volatilities on Resource Alam and Exploitasi Energi 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 Resource Alam with a short position of Exploitasi Energi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Resource Alam and Exploitasi Energi.

Diversification Opportunities for Resource Alam and Exploitasi Energi

-0.41

Correlation Coefficient

Resource Alam  Exploitasi Energi

Very good diversification

The 3 months correlation between Resource and Exploitasi is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Resource Alam Indonesia and Exploitasi Energi Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exploitasi Energi and Resource Alam 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 Resource Alam Indonesia are associated (or correlated) with Exploitasi Energi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exploitasi Energi has no effect on the direction of Resource Alam i.e., Resource Alam and Exploitasi Energi go up and down completely randomly.

Pair Corralation between Resource Alam and Exploitasi Energi

Assuming the 90 days trading horizon Resource Alam is expected to generate 22.9 times less return on investment than Exploitasi Energi. But when comparing it to its historical volatility, Resource Alam Indonesia is 1.77 times less risky than Exploitasi Energi. It trades about 0.11 of its potential returns per unit of risk. Exploitasi Energi Indonesia is currently generating about 1.47 of returns per unit of risk over similar time horizon. If you would invest  900.00  in Exploitasi Energi Indonesia on October 7, 2024 and sell it today you would earn a total of  1,700  from holding Exploitasi Energi Indonesia or generate 188.89% return on investment over 90 days.

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

Resource Alam Indonesia  vs.  Exploitasi Energi Indonesia

Resource Alam Indonesia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Resource Alam Indonesia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Exploitasi Energi

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Exploitasi Energi Indonesia are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Exploitasi Energi disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Resource Alam and Exploitasi Energi

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

The idea behind Resource Alam Indonesia and Exploitasi Energi Indonesia 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.