Correlation Between PAM Mineral and Cisarua Mountain

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

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

Diversification Opportunities for PAM Mineral and Cisarua Mountain

0.58

Correlation Coefficient

PAM Mineral  Cisarua Mountain

Very weak diversification

The 3 months correlation between PAM and Cisarua is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding PAM Mineral Tbk and Cisarua Mountain Dairy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cisarua Mountain Dairy and PAM Mineral 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 PAM Mineral Tbk are associated (or correlated) with Cisarua Mountain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cisarua Mountain Dairy has no effect on the direction of PAM Mineral i.e., PAM Mineral and Cisarua Mountain go up and down completely randomly.

Pair Corralation between PAM Mineral and Cisarua Mountain

Assuming the 90 days trading horizon PAM Mineral Tbk is expected to under-perform the Cisarua Mountain. But the stock apears to be less risky and, when comparing its historical volatility, PAM Mineral Tbk is 1.16 times less risky than Cisarua Mountain. The stock trades about -0.2 of its potential returns per unit of risk. The Cisarua Mountain Dairy is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  550,000  in Cisarua Mountain Dairy on October 26, 2024 and sell it today you would lose (66,000) from holding Cisarua Mountain Dairy or give up 12.0% of portfolio value over 90 days.

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

PAM Mineral Tbk  vs.  Cisarua Mountain Dairy

PAM Mineral Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PAM Mineral Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Cisarua Mountain Dairy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cisarua Mountain Dairy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with PAM Mineral and Cisarua Mountain

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

The idea behind PAM Mineral Tbk and Cisarua Mountain Dairy 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.