Correlation Between Perusahaan Gas and TBS Energi

Can any of the company-specific risk be diversified away by investing in both Perusahaan Gas and TBS Energi 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 TBS Energi 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 TBS Energi Utama, you can compare the effects of market volatilities on Perusahaan Gas and TBS Energi 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 TBS Energi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Perusahaan Gas and TBS Energi.

Diversification Opportunities for Perusahaan Gas and TBS Energi

-0.58

Correlation Coefficient

Perusahaan Gas  TBS Energi

Excellent diversification

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

Pair Corralation between Perusahaan Gas and TBS Energi

Assuming the 90 days trading horizon Perusahaan Gas is expected to generate 37.91 times less return on investment than TBS Energi. But when comparing it to its historical volatility, Perusahaan Gas Negara is 2.85 times less risky than TBS Energi. It trades about 0.01 of its potential returns per unit of risk. TBS Energi Utama is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  22,600  in TBS Energi Utama on September 30, 2024 and sell it today you would earn a total of  17,400  from holding TBS Energi Utama or generate 76.99% 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.  TBS Energi Utama

Perusahaan Gas Negara

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Perusahaan Gas Negara are ranked lower than 7 (%) 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 January 2025.

TBS Energi Utama

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TBS Energi Utama 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 January 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 TBS Energi

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

The idea behind Perusahaan Gas Negara and TBS Energi Utama 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.