Correlation Between PT Techno9 and Pertamina Geothermal

Can any of the company-specific risk be diversified away by investing in both PT Techno9 and Pertamina Geothermal 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 PT Techno9 and Pertamina Geothermal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PT Techno9 Indonesia and Pertamina Geothermal Energy, you can compare the effects of market volatilities on PT Techno9 and Pertamina Geothermal 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 PT Techno9 with a short position of Pertamina Geothermal. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Techno9 and Pertamina Geothermal.

Diversification Opportunities for PT Techno9 and Pertamina Geothermal

-0.82

Correlation Coefficient

PT Techno9  Pertamina Geothermal

Pay attention - limited upside

The 3 months correlation between NINE and Pertamina is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding PT Techno9 Indonesia and Pertamina Geothermal Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pertamina Geothermal and PT Techno9 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 PT Techno9 Indonesia are associated (or correlated) with Pertamina Geothermal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pertamina Geothermal has no effect on the direction of PT Techno9 i.e., PT Techno9 and Pertamina Geothermal go up and down completely randomly.

Pair Corralation between PT Techno9 and Pertamina Geothermal

Assuming the 90 days trading horizon PT Techno9 Indonesia is expected to generate 5.21 times more return on investment than Pertamina Geothermal. However, PT Techno9 is 5.21 times more volatile than Pertamina Geothermal Energy. It trades about 0.4 of its potential returns per unit of risk. Pertamina Geothermal Energy is currently generating about -0.13 per unit of risk. If you would invest  700.00  in PT Techno9 Indonesia on August 30, 2024 and sell it today you would earn a total of  2,900  from holding PT Techno9 Indonesia or generate 414.29% return on investment over 90 days.

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

PT Techno9 Indonesia  vs.  Pertamina Geothermal Energy

PT Techno9 Indonesia

Risk-Adjusted Performance

31 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in PT Techno9 Indonesia are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, PT Techno9 disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pertamina Geothermal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pertamina Geothermal Energy 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 PT Techno9 and Pertamina Geothermal

The main advantage of trading using opposite PT Techno9 and Pertamina Geothermal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Techno9 position performs unexpectedly, Pertamina Geothermal 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 Pertamina Geothermal will offset losses from the drop in Pertamina Geothermal's long position.

The idea behind PT Techno9 Indonesia and Pertamina Geothermal Energy 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.

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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.