Correlation Between Ladangbaja Murni and PAM Mineral

Can any of the company-specific risk be diversified away by investing in both Ladangbaja Murni and PAM Mineral 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 Ladangbaja Murni and PAM Mineral into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ladangbaja Murni PT and PAM Mineral Tbk, you can compare the effects of market volatilities on Ladangbaja Murni and PAM Mineral 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 Ladangbaja Murni with a short position of PAM Mineral. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ladangbaja Murni and PAM Mineral.

Diversification Opportunities for Ladangbaja Murni and PAM Mineral

-0.13

Correlation Coefficient

Ladangbaja Murni  PAM Mineral

Good diversification

The 3 months correlation between Ladangbaja and PAM is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Ladangbaja Murni PT and PAM Mineral Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PAM Mineral Tbk and Ladangbaja Murni 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 Ladangbaja Murni PT are associated (or correlated) with PAM Mineral. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PAM Mineral Tbk has no effect on the direction of Ladangbaja Murni i.e., Ladangbaja Murni and PAM Mineral go up and down completely randomly.

Pair Corralation between Ladangbaja Murni and PAM Mineral

Assuming the 90 days trading horizon Ladangbaja Murni PT is expected to generate 1.91 times more return on investment than PAM Mineral. However, Ladangbaja Murni is 1.91 times more volatile than PAM Mineral Tbk. It trades about 0.11 of its potential returns per unit of risk. PAM Mineral Tbk is currently generating about 0.1 per unit of risk. If you would invest  14,600  in Ladangbaja Murni PT on September 1, 2024 and sell it today you would earn a total of  16,400  from holding Ladangbaja Murni PT or generate 112.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.21%
Values	Daily Returns

Ladangbaja Murni PT  vs.  PAM Mineral Tbk

Ladangbaja Murni

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ladangbaja Murni PT 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 December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

PAM Mineral Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PAM Mineral Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, PAM Mineral 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 Ladangbaja Murni and PAM Mineral

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

The idea behind Ladangbaja Murni PT and PAM Mineral 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.