Correlation Between Nanotech Indonesia and Repower Asia

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

By analyzing existing cross correlation between Nanotech Indonesia Global and Repower Asia Indonesia, you can compare the effects of market volatilities on Nanotech Indonesia and Repower Asia 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 Nanotech Indonesia with a short position of Repower Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nanotech Indonesia and Repower Asia.

Diversification Opportunities for Nanotech Indonesia and Repower Asia

0.62

Correlation Coefficient

Nanotech Indonesia  Repower Asia

Poor diversification

The 3 months correlation between Nanotech and Repower is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Nanotech Indonesia Global and Repower Asia Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Repower Asia Indonesia and Nanotech Indonesia 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 Nanotech Indonesia Global are associated (or correlated) with Repower Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Repower Asia Indonesia has no effect on the direction of Nanotech Indonesia i.e., Nanotech Indonesia and Repower Asia go up and down completely randomly.

Pair Corralation between Nanotech Indonesia and Repower Asia

Assuming the 90 days trading horizon Nanotech Indonesia Global is expected to generate 0.8 times more return on investment than Repower Asia. However, Nanotech Indonesia Global is 1.25 times less risky than Repower Asia. It trades about 0.07 of its potential returns per unit of risk. Repower Asia Indonesia is currently generating about 0.04 per unit of risk. If you would invest  2,200  in Nanotech Indonesia Global on December 1, 2024 and sell it today you would earn a total of  300.00  from holding Nanotech Indonesia Global or generate 13.64% return on investment over 90 days.

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

Nanotech Indonesia Global  vs.  Repower Asia Indonesia

Nanotech Indonesia Global

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nanotech Indonesia Global are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Nanotech Indonesia disclosed solid returns over the last few months and may actually be approaching a breakup point.

Repower Asia Indonesia

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Repower Asia Indonesia are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Repower Asia disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nanotech Indonesia and Repower Asia

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

The idea behind Nanotech Indonesia Global and Repower Asia Indonesia 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.