Correlation Between Medco Energi and Vale Indonesia
Can any of the company-specific risk be diversified away by investing in both Medco Energi and Vale 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 Medco Energi and Vale Indonesia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Medco Energi Internasional and Vale Indonesia Tbk, you can compare the effects of market volatilities on Medco Energi and Vale 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 Medco Energi with a short position of Vale Indonesia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Medco Energi and Vale Indonesia.
Diversification Opportunities for Medco Energi and Vale Indonesia
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Medco and Vale is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Medco Energi Internasional and Vale Indonesia Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale Indonesia Tbk and Medco 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 Medco Energi Internasional are associated (or correlated) with Vale Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vale Indonesia Tbk has no effect on the direction of Medco Energi i.e., Medco Energi and Vale Indonesia go up and down completely randomly.
Pair Corralation between Medco Energi and Vale Indonesia
Assuming the 90 days trading horizon Medco Energi Internasional is expected to generate 0.74 times more return on investment than Vale Indonesia. However, Medco Energi Internasional is 1.34 times less risky than Vale Indonesia. It trades about -0.01 of its potential returns per unit of risk. Vale Indonesia Tbk is currently generating about -0.13 per unit of risk. If you would invest 105,000 in Medco Energi Internasional on December 1, 2024 and sell it today you would lose (3,000) from holding Medco Energi Internasional or give up 2.86% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Medco Energi Internasional vs. Vale Indonesia Tbk
Performance |
Timeline |
Medco Energi Interna |
Vale Indonesia Tbk |
Medco Energi and Vale Indonesia Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Medco Energi and Vale Indonesia
The main advantage of trading using opposite Medco Energi and Vale Indonesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Medco Energi position performs unexpectedly, Vale 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 Vale Indonesia will offset losses from the drop in Vale Indonesia's long position.Medco Energi vs. Vale Indonesia Tbk | Medco Energi vs. Timah Persero Tbk | Medco Energi vs. Perusahaan Gas Negara | Medco Energi vs. Bukit Asam Tbk |
Vale Indonesia vs. Timah Persero Tbk | Vale Indonesia vs. Aneka Tambang Persero | Vale Indonesia vs. Bukit Asam Tbk | Vale Indonesia vs. Perusahaan Gas Negara |
Check out your portfolio center.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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
Other Complementary Tools
Content Syndication Quickly integrate customizable finance content to your own investment portal | |
Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios |