Correlation Between Perusahaan Gas and Resource Alam

Can any of the company-specific risk be diversified away by investing in both Perusahaan Gas and Resource Alam 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 Perusahaan Gas and Resource Alam into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Perusahaan Gas Negara and Resource Alam Indonesia, you can compare the effects of market volatilities on Perusahaan Gas and Resource Alam 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 Perusahaan Gas with a short position of Resource Alam. Check out your portfolio center. Please also check ongoing floating volatility patterns of Perusahaan Gas and Resource Alam.

Diversification Opportunities for Perusahaan Gas and Resource Alam

-0.41

Correlation Coefficient

Perusahaan Gas  Resource Alam

Very good diversification

The 3 months correlation between Perusahaan and Resource is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Perusahaan Gas Negara and Resource Alam Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Resource Alam Indonesia and Perusahaan Gas 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 Perusahaan Gas Negara are associated (or correlated) with Resource Alam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Resource Alam Indonesia has no effect on the direction of Perusahaan Gas i.e., Perusahaan Gas and Resource Alam go up and down completely randomly.

Pair Corralation between Perusahaan Gas and Resource Alam

Assuming the 90 days trading horizon Perusahaan Gas Negara is expected to generate 1.04 times more return on investment than Resource Alam. However, Perusahaan Gas is 1.04 times more volatile than Resource Alam Indonesia. It trades about 0.07 of its potential returns per unit of risk. Resource Alam Indonesia is currently generating about -0.18 per unit of risk. If you would invest  153,500  in Perusahaan Gas Negara on October 17, 2024 and sell it today you would earn a total of  12,000  from holding Perusahaan Gas Negara or generate 7.82% return on investment over 90 days.

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

Perusahaan Gas Negara  vs.  Resource Alam Indonesia

Perusahaan Gas Negara

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Perusahaan Gas Negara are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Perusahaan Gas may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Resource Alam Indonesia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Resource Alam Indonesia 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 February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Perusahaan Gas and Resource Alam

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

The idea behind Perusahaan Gas Negara and Resource Alam 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.