Correlation Between Merdeka Copper and PAM Mineral

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

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

Diversification Opportunities for Merdeka Copper and PAM Mineral

-0.18

Correlation Coefficient

Merdeka Copper  PAM Mineral

Good diversification

The 3 months correlation between Merdeka and PAM is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Merdeka Copper Gold 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 Merdeka Copper 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 Merdeka Copper Gold 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 Merdeka Copper i.e., Merdeka Copper and PAM Mineral go up and down completely randomly.

Pair Corralation between Merdeka Copper and PAM Mineral

Assuming the 90 days trading horizon Merdeka Copper Gold is expected to under-perform the PAM Mineral. In addition to that, Merdeka Copper is 1.73 times more volatile than PAM Mineral Tbk. It trades about -0.02 of its total potential returns per unit of risk. PAM Mineral Tbk is currently generating about 0.1 per unit of volatility. If you would invest  26,000  in PAM Mineral Tbk on December 30, 2024 and sell it today you would earn a total of  3,800  from holding PAM Mineral Tbk or generate 14.62% return on investment over 90 days.

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

Merdeka Copper Gold  vs.  PAM Mineral Tbk

Merdeka Copper Gold

Risk-Adjusted Performance

Very Weak

Over the last 90 days Merdeka Copper Gold has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Merdeka Copper is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

PAM Mineral Tbk

Risk-Adjusted Performance

OK

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

Pair Trading with Merdeka Copper and PAM Mineral

The main advantage of trading using opposite Merdeka Copper and PAM Mineral positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merdeka Copper 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 Merdeka Copper Gold 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.