Correlation Between Resource Alam and Petrosea Tbk

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

Diversification Opportunities for Resource Alam and Petrosea Tbk

-0.79

Correlation Coefficient

Resource Alam  Petrosea Tbk

Pay attention - limited upside

The 3 months correlation between Resource and Petrosea is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Resource Alam Indonesia and Petrosea Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrosea Tbk 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 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 Resource Alam i.e., Resource Alam and Petrosea Tbk go up and down completely randomly.

Pair Corralation between Resource Alam and Petrosea Tbk

Assuming the 90 days trading horizon Resource Alam is expected to generate 5.53 times less return on investment than Petrosea Tbk. But when comparing it to its historical volatility, Resource Alam Indonesia is 1.74 times less risky than Petrosea Tbk. It trades about 0.06 of its potential returns per unit of risk. Petrosea Tbk is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  772,500  in Petrosea Tbk on September 3, 2024 and sell it today you would earn a total of  1,200,000  from holding Petrosea Tbk or generate 155.34% return on investment over 90 days.

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

Resource Alam Indonesia  vs.  Petrosea Tbk

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

The main advantage of trading using opposite Resource Alam and Petrosea Tbk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Resource Alam 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 Resource Alam Indonesia 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.