Correlation Between Terregra Asia and Kapuas Prima

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Can any of the company-specific risk be diversified away by investing in both Terregra Asia and Kapuas Prima 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 Terregra Asia and Kapuas Prima into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Terregra Asia Energy and Kapuas Prima Coal, you can compare the effects of market volatilities on Terregra Asia and Kapuas Prima 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 Terregra Asia with a short position of Kapuas Prima. Check out your portfolio center. Please also check ongoing floating volatility patterns of Terregra Asia and Kapuas Prima.

Diversification Opportunities for Terregra Asia and Kapuas Prima

0.76
  Correlation Coefficient

Poor diversification

The 3 months correlation between Terregra and Kapuas is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Terregra Asia Energy and Kapuas Prima Coal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kapuas Prima Coal and Terregra Asia 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 Terregra Asia Energy are associated (or correlated) with Kapuas Prima. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kapuas Prima Coal has no effect on the direction of Terregra Asia i.e., Terregra Asia and Kapuas Prima go up and down completely randomly.

Pair Corralation between Terregra Asia and Kapuas Prima

Assuming the 90 days trading horizon Terregra Asia Energy is expected to generate 1.14 times more return on investment than Kapuas Prima. However, Terregra Asia is 1.14 times more volatile than Kapuas Prima Coal. It trades about 0.26 of its potential returns per unit of risk. Kapuas Prima Coal is currently generating about 0.13 per unit of risk. If you would invest  2,100  in Terregra Asia Energy on October 20, 2024 and sell it today you would earn a total of  2,500  from holding Terregra Asia Energy or generate 119.05% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy98.36%
ValuesDaily Returns

Terregra Asia Energy  vs.  Kapuas Prima Coal

 Performance 
       Timeline  
Terregra Asia Energy 

Risk-Adjusted Performance

20 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Terregra Asia Energy are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Terregra Asia disclosed solid returns over the last few months and may actually be approaching a breakup point.
Kapuas Prima Coal 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Kapuas Prima Coal are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Kapuas Prima disclosed solid returns over the last few months and may actually be approaching a breakup point.

Terregra Asia and Kapuas Prima Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Terregra Asia and Kapuas Prima

The main advantage of trading using opposite Terregra Asia and Kapuas Prima positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Terregra Asia position performs unexpectedly, Kapuas Prima 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 Kapuas Prima will offset losses from the drop in Kapuas Prima's long position.
The idea behind Terregra Asia Energy and Kapuas Prima Coal 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.

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