Correlation Between Mitra Energi and Indorama Synthetics

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

By analyzing existing cross correlation between Mitra Energi Persada and Indorama Synthetics Tbk, you can compare the effects of market volatilities on Mitra Energi and Indorama Synthetics 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 Mitra Energi with a short position of Indorama Synthetics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mitra Energi and Indorama Synthetics.

Diversification Opportunities for Mitra Energi and Indorama Synthetics

-0.72

Correlation Coefficient

Mitra Energi  Indorama Synthetics

Pay attention - limited upside

The 3 months correlation between Mitra and Indorama is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Mitra Energi Persada and Indorama Synthetics Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indorama Synthetics Tbk and Mitra Energi 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 Mitra Energi Persada are associated (or correlated) with Indorama Synthetics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indorama Synthetics Tbk has no effect on the direction of Mitra Energi i.e., Mitra Energi and Indorama Synthetics go up and down completely randomly.

Pair Corralation between Mitra Energi and Indorama Synthetics

Assuming the 90 days trading horizon Mitra Energi Persada is expected to generate 1.58 times more return on investment than Indorama Synthetics. However, Mitra Energi is 1.58 times more volatile than Indorama Synthetics Tbk. It trades about 0.21 of its potential returns per unit of risk. Indorama Synthetics Tbk is currently generating about -0.12 per unit of risk. If you would invest  58,500  in Mitra Energi Persada on December 22, 2024 and sell it today you would earn a total of  35,000  from holding Mitra Energi Persada or generate 59.83% return on investment over 90 days.

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

Mitra Energi Persada  vs.  Indorama Synthetics Tbk

Mitra Energi Persada

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mitra Energi Persada are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward-looking signals, Mitra Energi disclosed solid returns over the last few months and may actually be approaching a breakup point.

Indorama Synthetics Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Indorama Synthetics Tbk 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 April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Mitra Energi and Indorama Synthetics

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

The idea behind Mitra Energi Persada and Indorama Synthetics 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.