Correlation Between Timah Persero and Merdeka Copper

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

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

Diversification Opportunities for Timah Persero and Merdeka Copper

0.67

Correlation Coefficient

Timah Persero  Merdeka Copper

Poor diversification

The 3 months correlation between Timah and Merdeka is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Timah Persero Tbk and Merdeka Copper Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merdeka Copper Gold and Timah Persero 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 Timah Persero Tbk are associated (or correlated) with Merdeka Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merdeka Copper Gold has no effect on the direction of Timah Persero i.e., Timah Persero and Merdeka Copper go up and down completely randomly.

Pair Corralation between Timah Persero and Merdeka Copper

Assuming the 90 days trading horizon Timah Persero Tbk is expected to under-perform the Merdeka Copper. But the stock apears to be less risky and, when comparing its historical volatility, Timah Persero Tbk is 1.38 times less risky than Merdeka Copper. The stock trades about -0.04 of its potential returns per unit of risk. The Merdeka Copper Gold is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  161,500  in Merdeka Copper Gold on December 30, 2024 and sell it today you would lose (18,500) from holding Merdeka Copper Gold or give up 11.46% of portfolio value over 90 days.

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

Timah Persero Tbk  vs.  Merdeka Copper Gold

Timah Persero Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Timah Persero Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Merdeka Copper Gold

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Timah Persero and Merdeka Copper

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

The idea behind Timah Persero Tbk and Merdeka Copper Gold 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.