Correlation Between Link Net and Energi Mega

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

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

Diversification Opportunities for Link Net and Energi Mega

-0.54

Correlation Coefficient

Link Net  Energi Mega

Excellent diversification

The 3 months correlation between Link and Energi is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Link Net Tbk and Energi Mega Persada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energi Mega Persada and Link Net 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 Link Net Tbk are associated (or correlated) with Energi Mega. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energi Mega Persada has no effect on the direction of Link Net i.e., Link Net and Energi Mega go up and down completely randomly.

Pair Corralation between Link Net and Energi Mega

Assuming the 90 days trading horizon Link Net Tbk is expected to generate 2.42 times more return on investment than Energi Mega. However, Link Net is 2.42 times more volatile than Energi Mega Persada. It trades about 0.14 of its potential returns per unit of risk. Energi Mega Persada is currently generating about -0.15 per unit of risk. If you would invest  117,000  in Link Net Tbk on December 27, 2024 and sell it today you would earn a total of  61,500  from holding Link Net Tbk or generate 52.56% return on investment over 90 days.

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

Link Net Tbk  vs.  Energi Mega Persada

Link Net Tbk

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Link Net Tbk are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Link Net disclosed solid returns over the last few months and may actually be approaching a breakup point.

Energi Mega Persada

Risk-Adjusted Performance

Very Weak

Over the last 90 days Energi Mega Persada 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 Link Net and Energi Mega

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

The idea behind Link Net Tbk and Energi Mega Persada 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.