Correlation Between Panin Financial and Indonesian Tobacco

Can any of the company-specific risk be diversified away by investing in both Panin Financial and Indonesian Tobacco 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 Panin Financial and Indonesian Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Panin Financial Tbk and Indonesian Tobacco Tbk, you can compare the effects of market volatilities on Panin Financial and Indonesian Tobacco 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 Panin Financial with a short position of Indonesian Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Panin Financial and Indonesian Tobacco.

Diversification Opportunities for Panin Financial and Indonesian Tobacco

0.92

Correlation Coefficient

Panin Financial  Indonesian Tobacco

Almost no diversification

The 3 months correlation between Panin and Indonesian is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Panin Financial Tbk and Indonesian Tobacco Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indonesian Tobacco Tbk and Panin Financial 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 Panin Financial Tbk are associated (or correlated) with Indonesian Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indonesian Tobacco Tbk has no effect on the direction of Panin Financial i.e., Panin Financial and Indonesian Tobacco go up and down completely randomly.

Pair Corralation between Panin Financial and Indonesian Tobacco

Assuming the 90 days trading horizon Panin Financial Tbk is expected to under-perform the Indonesian Tobacco. In addition to that, Panin Financial is 1.53 times more volatile than Indonesian Tobacco Tbk. It trades about -0.06 of its total potential returns per unit of risk. Indonesian Tobacco Tbk is currently generating about -0.08 per unit of volatility. If you would invest  24,800  in Indonesian Tobacco Tbk on December 30, 2024 and sell it today you would lose (2,800) from holding Indonesian Tobacco Tbk or give up 11.29% of portfolio value over 90 days.

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

Panin Financial Tbk  vs.  Indonesian Tobacco Tbk

Panin Financial Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Panin Financial 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.

Indonesian Tobacco Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Indonesian Tobacco Tbk 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 Panin Financial and Indonesian Tobacco

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

The idea behind Panin Financial Tbk and Indonesian Tobacco 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.