Correlation Between Petrosea Tbk and Indika Energy

Can any of the company-specific risk be diversified away by investing in both Petrosea Tbk and Indika Energy 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 Petrosea Tbk and Indika Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Petrosea Tbk and Indika Energy

0.79

Correlation Coefficient

Petrosea Tbk  Indika Energy

Poor diversification

The 3 months correlation between Petrosea and Indika is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Petrosea Tbk and Indika Energy Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indika Energy Tbk and Petrosea Tbk 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 Petrosea Tbk are associated (or correlated) with Indika Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indika Energy Tbk has no effect on the direction of Petrosea Tbk i.e., Petrosea Tbk and Indika Energy go up and down completely randomly.

Pair Corralation between Petrosea Tbk and Indika Energy

Assuming the 90 days trading horizon Petrosea Tbk is expected to generate 2.05 times more return on investment than Indika Energy. However, Petrosea Tbk is 2.05 times more volatile than Indika Energy Tbk. It trades about 0.0 of its potential returns per unit of risk. Indika Energy Tbk is currently generating about -0.11 per unit of risk. If you would invest  276,250  in Petrosea Tbk on December 29, 2024 and sell it today you would lose (32,250) from holding Petrosea Tbk or give up 11.67% of portfolio value over 90 days.

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

Petrosea Tbk  vs.  Indika Energy Tbk

Petrosea Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Petrosea Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Petrosea Tbk is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Indika Energy Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Indika Energy 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 Petrosea Tbk and Indika Energy

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

The idea behind Petrosea Tbk and Indika Energy 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.