Correlation Between Pertamina Geothermal and Indorama Synthetics

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

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

Diversification Opportunities for Pertamina Geothermal and Indorama Synthetics

0.66

Correlation Coefficient

Pertamina Geothermal  Indorama Synthetics

Poor diversification

The 3 months correlation between Pertamina and Indorama is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Pertamina Geothermal Energy and Indorama Synthetics Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indorama Synthetics Tbk and Pertamina Geothermal 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 Pertamina Geothermal Energy are associated (or correlated) with Indorama Synthetics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indorama Synthetics Tbk has no effect on the direction of Pertamina Geothermal i.e., Pertamina Geothermal and Indorama Synthetics go up and down completely randomly.

Pair Corralation between Pertamina Geothermal and Indorama Synthetics

Assuming the 90 days trading horizon Pertamina Geothermal Energy is expected to under-perform the Indorama Synthetics. In addition to that, Pertamina Geothermal is 1.12 times more volatile than Indorama Synthetics Tbk. It trades about -0.11 of its total potential returns per unit of risk. Indorama Synthetics Tbk is currently generating about -0.12 per unit of volatility. If you would invest  274,000  in Indorama Synthetics Tbk on December 24, 2024 and sell it today you would lose (52,000) from holding Indorama Synthetics Tbk or give up 18.98% of portfolio value over 90 days.

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

Pertamina Geothermal Energy  vs.  Indorama Synthetics Tbk

Pertamina Geothermal

Risk-Adjusted Performance

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 conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Indorama Synthetics Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Indorama Synthetics Tbk 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 April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Pertamina Geothermal and Indorama Synthetics

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

The idea behind Pertamina Geothermal Energy and Indorama Synthetics Tbk 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.