Correlation Between TerraCom and Indo Tambangraya

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

By analyzing existing cross correlation between TerraCom Limited and Indo Tambangraya Megah, you can compare the effects of market volatilities on TerraCom and Indo Tambangraya 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 TerraCom with a short position of Indo Tambangraya. Check out your portfolio center. Please also check ongoing floating volatility patterns of TerraCom and Indo Tambangraya.

Diversification Opportunities for TerraCom and Indo Tambangraya

-0.39

Correlation Coefficient

TerraCom  Indo Tambangraya

Very good diversification

The 3 months correlation between TerraCom and Indo is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding TerraCom Limited and Indo Tambangraya Megah in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indo Tambangraya Megah and TerraCom 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 TerraCom Limited are associated (or correlated) with Indo Tambangraya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indo Tambangraya Megah has no effect on the direction of TerraCom i.e., TerraCom and Indo Tambangraya go up and down completely randomly.

Pair Corralation between TerraCom and Indo Tambangraya

Assuming the 90 days horizon TerraCom Limited is expected to under-perform the Indo Tambangraya. In addition to that, TerraCom is 3.58 times more volatile than Indo Tambangraya Megah. It trades about -0.38 of its total potential returns per unit of risk. Indo Tambangraya Megah is currently generating about -0.06 per unit of volatility. If you would invest  335.00  in Indo Tambangraya Megah on December 29, 2024 and sell it today you would lose (50.00) from holding Indo Tambangraya Megah or give up 14.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	13.85%
Values	Daily Returns

TerraCom Limited  vs.  Indo Tambangraya Megah

TerraCom Limited

Risk-Adjusted Performance

Very Weak

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

Indo Tambangraya Megah

Risk-Adjusted Performance

Very Weak

Over the last 90 days Indo Tambangraya Megah has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with TerraCom and Indo Tambangraya

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

The idea behind TerraCom Limited and Indo Tambangraya Megah 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.