Correlation Between Suparma Tbk and Tirta Mahakam

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

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

Diversification Opportunities for Suparma Tbk and Tirta Mahakam

-0.17

Correlation Coefficient

Suparma Tbk  Tirta Mahakam

Good diversification

The 3 months correlation between Suparma and Tirta is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Suparma Tbk and Tirta Mahakam Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tirta Mahakam Resources and Suparma 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 Suparma Tbk are associated (or correlated) with Tirta Mahakam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tirta Mahakam Resources has no effect on the direction of Suparma Tbk i.e., Suparma Tbk and Tirta Mahakam go up and down completely randomly.

Pair Corralation between Suparma Tbk and Tirta Mahakam

Assuming the 90 days trading horizon Suparma Tbk is expected to generate 19.85 times less return on investment than Tirta Mahakam. But when comparing it to its historical volatility, Suparma Tbk is 4.41 times less risky than Tirta Mahakam. It trades about 0.01 of its potential returns per unit of risk. Tirta Mahakam Resources is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  5,000  in Tirta Mahakam Resources on September 12, 2024 and sell it today you would earn a total of  700.00  from holding Tirta Mahakam Resources or generate 14.0% return on investment over 90 days.

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

Suparma Tbk  vs.  Tirta Mahakam Resources

Suparma Tbk

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Suparma Tbk are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Suparma Tbk is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Tirta Mahakam Resources

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tirta Mahakam Resources are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Tirta Mahakam disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Suparma Tbk and Tirta Mahakam

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

The idea behind Suparma Tbk and Tirta Mahakam Resources 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.

Check out your portfolio center.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.