Correlation Between Pertamina Geothermal and Merdeka Copper

Can any of the company-specific risk be diversified away by investing in both Pertamina Geothermal and Merdeka Copper 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 Merdeka Copper 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 Merdeka Copper Gold, you can compare the effects of market volatilities on Pertamina Geothermal and Merdeka Copper 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 Merdeka Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pertamina Geothermal and Merdeka Copper.

Diversification Opportunities for Pertamina Geothermal and Merdeka Copper

0.94

Correlation Coefficient

Pertamina Geothermal  Merdeka Copper

Almost no diversification

The 3 months correlation between Pertamina and Merdeka is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Pertamina Geothermal Energy and Merdeka Copper Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merdeka Copper Gold 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 Merdeka Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merdeka Copper Gold has no effect on the direction of Pertamina Geothermal i.e., Pertamina Geothermal and Merdeka Copper go up and down completely randomly.

Pair Corralation between Pertamina Geothermal and Merdeka Copper

Assuming the 90 days trading horizon Pertamina Geothermal Energy is expected to generate 0.68 times more return on investment than Merdeka Copper. However, Pertamina Geothermal Energy is 1.48 times less risky than Merdeka Copper. It trades about -0.26 of its potential returns per unit of risk. Merdeka Copper Gold is currently generating about -0.4 per unit of risk. If you would invest  118,000  in Pertamina Geothermal Energy on October 12, 2024 and sell it today you would lose (28,500) from holding Pertamina Geothermal Energy or give up 24.15% of portfolio value over 90 days.

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

Pertamina Geothermal Energy  vs.  Merdeka Copper Gold

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 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.

Merdeka Copper Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Merdeka Copper Gold 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 Pertamina Geothermal and Merdeka Copper

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

The idea behind Pertamina Geothermal Energy and Merdeka Copper Gold 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.