Correlation Between Surya Toto and Transcoal Pacific

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

By analyzing existing cross correlation between Surya Toto Indonesia and Transcoal Pacific Tbk, you can compare the effects of market volatilities on Surya Toto and Transcoal Pacific 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 Surya Toto with a short position of Transcoal Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Surya Toto and Transcoal Pacific.

Diversification Opportunities for Surya Toto and Transcoal Pacific

0.05

Correlation Coefficient

Surya Toto  Transcoal Pacific

Significant diversification

The 3 months correlation between Surya and Transcoal is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Surya Toto Indonesia and Transcoal Pacific Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transcoal Pacific Tbk and Surya Toto 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 Surya Toto Indonesia are associated (or correlated) with Transcoal Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transcoal Pacific Tbk has no effect on the direction of Surya Toto i.e., Surya Toto and Transcoal Pacific go up and down completely randomly.

Pair Corralation between Surya Toto and Transcoal Pacific

Assuming the 90 days trading horizon Surya Toto Indonesia is expected to generate 0.64 times more return on investment than Transcoal Pacific. However, Surya Toto Indonesia is 1.56 times less risky than Transcoal Pacific. It trades about 0.09 of its potential returns per unit of risk. Transcoal Pacific Tbk is currently generating about 0.02 per unit of risk. If you would invest  21,071  in Surya Toto Indonesia on September 14, 2024 and sell it today you would earn a total of  1,329  from holding Surya Toto Indonesia or generate 6.31% return on investment over 90 days.

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

Surya Toto Indonesia  vs.  Transcoal Pacific Tbk

Surya Toto Indonesia

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Surya Toto Indonesia are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Surya Toto may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Transcoal Pacific Tbk

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Transcoal Pacific Tbk are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Transcoal Pacific 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 Surya Toto and Transcoal Pacific

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

The idea behind Surya Toto Indonesia and Transcoal Pacific 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.