Correlation Between PT Steel and Globex Mining

Can any of the company-specific risk be diversified away by investing in both PT Steel and Globex Mining 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 PT Steel and Globex Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PT Steel Pipe and Globex Mining Enterprises, you can compare the effects of market volatilities on PT Steel and Globex Mining 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 PT Steel with a short position of Globex Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Steel and Globex Mining.

Diversification Opportunities for PT Steel and Globex Mining

-0.63

Correlation Coefficient

PT Steel  Globex Mining

Excellent diversification

The 3 months correlation between S08 and Globex is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding PT Steel Pipe and Globex Mining Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globex Mining Enterprises and PT Steel 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 PT Steel Pipe are associated (or correlated) with Globex Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globex Mining Enterprises has no effect on the direction of PT Steel i.e., PT Steel and Globex Mining go up and down completely randomly.

Pair Corralation between PT Steel and Globex Mining

Assuming the 90 days horizon PT Steel Pipe is expected to generate 3.53 times more return on investment than Globex Mining. However, PT Steel is 3.53 times more volatile than Globex Mining Enterprises. It trades about 0.03 of its potential returns per unit of risk. Globex Mining Enterprises is currently generating about 0.04 per unit of risk. If you would invest  1.05  in PT Steel Pipe on October 11, 2024 and sell it today you would earn a total of  0.10  from holding PT Steel Pipe or generate 9.52% return on investment over 90 days.

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

PT Steel Pipe  vs.  Globex Mining Enterprises

PT Steel Pipe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Steel Pipe has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Globex Mining Enterprises

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Globex Mining Enterprises are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Globex Mining unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Steel and Globex Mining

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

The idea behind PT Steel Pipe and Globex Mining Enterprises 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.