Correlation Between Trust Finance and Inocycle Technology

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

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

Diversification Opportunities for Trust Finance and Inocycle Technology

0.14

Correlation Coefficient

Trust Finance  Inocycle Technology

Average diversification

The 3 months correlation between Trust and Inocycle is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Trust Finance Indonesia and Inocycle Technology Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inocycle Technology Tbk and Trust Finance 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 Trust Finance Indonesia are associated (or correlated) with Inocycle Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inocycle Technology Tbk has no effect on the direction of Trust Finance i.e., Trust Finance and Inocycle Technology go up and down completely randomly.

Pair Corralation between Trust Finance and Inocycle Technology

Assuming the 90 days trading horizon Trust Finance Indonesia is expected to generate 1.38 times more return on investment than Inocycle Technology. However, Trust Finance is 1.38 times more volatile than Inocycle Technology Tbk. It trades about 0.17 of its potential returns per unit of risk. Inocycle Technology Tbk is currently generating about 0.03 per unit of risk. If you would invest  42,600  in Trust Finance Indonesia on September 13, 2024 and sell it today you would earn a total of  19,400  from holding Trust Finance Indonesia or generate 45.54% return on investment over 90 days.

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

Trust Finance Indonesia  vs.  Inocycle Technology Tbk

Trust Finance Indonesia

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Trust Finance Indonesia are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Trust Finance disclosed solid returns over the last few months and may actually be approaching a breakup point.

Inocycle Technology Tbk

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Inocycle Technology Tbk are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Inocycle Technology 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 Trust Finance and Inocycle Technology

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

The idea behind Trust Finance Indonesia and Inocycle Technology 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.