Correlation Between PAM Mineral and Nusa Palapa

Can any of the company-specific risk be diversified away by investing in both PAM Mineral and Nusa Palapa 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 Nusa Palapa 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 Nusa Palapa Gemilang, you can compare the effects of market volatilities on PAM Mineral and Nusa Palapa 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 Nusa Palapa. Check out your portfolio center. Please also check ongoing floating volatility patterns of PAM Mineral and Nusa Palapa.

Diversification Opportunities for PAM Mineral and Nusa Palapa

-0.2

Correlation Coefficient

PAM Mineral  Nusa Palapa

Good diversification

The 3 months correlation between PAM and Nusa is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding PAM Mineral Tbk and Nusa Palapa Gemilang in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nusa Palapa Gemilang 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 Nusa Palapa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nusa Palapa Gemilang has no effect on the direction of PAM Mineral i.e., PAM Mineral and Nusa Palapa go up and down completely randomly.

Pair Corralation between PAM Mineral and Nusa Palapa

Assuming the 90 days trading horizon PAM Mineral Tbk is expected to generate 0.99 times more return on investment than Nusa Palapa. However, PAM Mineral Tbk is 1.02 times less risky than Nusa Palapa. It trades about 0.13 of its potential returns per unit of risk. Nusa Palapa Gemilang is currently generating about -0.36 per unit of risk. If you would invest  27,600  in PAM Mineral Tbk on September 1, 2024 and sell it today you would earn a total of  2,000  from holding PAM Mineral Tbk or generate 7.25% return on investment over 90 days.

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

PAM Mineral Tbk  vs.  Nusa Palapa Gemilang

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 quite persistent forward-looking signals, PAM Mineral is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Nusa Palapa Gemilang

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nusa Palapa Gemilang has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with PAM Mineral and Nusa Palapa

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

The idea behind PAM Mineral Tbk and Nusa Palapa Gemilang 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.