Correlation Between Lion Metal and PT Indonesia

Can any of the company-specific risk be diversified away by investing in both Lion Metal and PT Indonesia 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 Lion Metal and PT Indonesia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lion Metal Works and PT Indonesia Kendaraan, you can compare the effects of market volatilities on Lion Metal and PT Indonesia 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 Lion Metal with a short position of PT Indonesia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lion Metal and PT Indonesia.

Diversification Opportunities for Lion Metal and PT Indonesia

0.51

Correlation Coefficient

Lion Metal  PT Indonesia

Very weak diversification

The 3 months correlation between Lion and IPCC is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Lion Metal Works and PT Indonesia Kendaraan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Indonesia Kendaraan and Lion Metal 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 Lion Metal Works are associated (or correlated) with PT Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Indonesia Kendaraan has no effect on the direction of Lion Metal i.e., Lion Metal and PT Indonesia go up and down completely randomly.

Pair Corralation between Lion Metal and PT Indonesia

Assuming the 90 days trading horizon Lion Metal Works is expected to generate 8.6 times more return on investment than PT Indonesia. However, Lion Metal is 8.6 times more volatile than PT Indonesia Kendaraan. It trades about 0.09 of its potential returns per unit of risk. PT Indonesia Kendaraan is currently generating about 0.07 per unit of risk. If you would invest  32,600  in Lion Metal Works on December 23, 2024 and sell it today you would earn a total of  10,200  from holding Lion Metal Works or generate 31.29% return on investment over 90 days.

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

Lion Metal Works  vs.  PT Indonesia Kendaraan

Lion Metal Works

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lion Metal Works are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Lion Metal disclosed solid returns over the last few months and may actually be approaching a breakup point.

PT Indonesia Kendaraan

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PT Indonesia Kendaraan are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, PT Indonesia 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 Lion Metal and PT Indonesia

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

The idea behind Lion Metal Works and PT Indonesia Kendaraan 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..