Correlation Between Tirta Mahakam and Suparma Tbk

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

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

Diversification Opportunities for Tirta Mahakam and Suparma Tbk

-0.3

Correlation Coefficient

Tirta Mahakam  Suparma Tbk

Very good diversification

The 3 months correlation between Tirta and Suparma is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Tirta Mahakam Resources and Suparma Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suparma Tbk and Tirta Mahakam 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 Tirta Mahakam Resources are associated (or correlated) with Suparma Tbk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suparma Tbk has no effect on the direction of Tirta Mahakam i.e., Tirta Mahakam and Suparma Tbk go up and down completely randomly.

Pair Corralation between Tirta Mahakam and Suparma Tbk

Assuming the 90 days trading horizon Tirta Mahakam Resources is expected to generate 5.82 times more return on investment than Suparma Tbk. However, Tirta Mahakam is 5.82 times more volatile than Suparma Tbk. It trades about 0.27 of its potential returns per unit of risk. Suparma Tbk is currently generating about -0.32 per unit of risk. If you would invest  2,400  in Tirta Mahakam Resources on September 5, 2024 and sell it today you would earn a total of  1,000.00  from holding Tirta Mahakam Resources or generate 41.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Tirta Mahakam Resources  vs.  Suparma Tbk

Tirta Mahakam Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tirta Mahakam Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Suparma Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Suparma Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with Tirta Mahakam and Suparma Tbk

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

The idea behind Tirta Mahakam Resources and Suparma Tbk 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.