Correlation Between Weha Transportasi and Transcoal Pacific

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

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

Diversification Opportunities for Weha Transportasi and Transcoal Pacific

0.18

Correlation Coefficient

Weha Transportasi  Transcoal Pacific

Average diversification

The 3 months correlation between Weha and Transcoal is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Weha Transportasi 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 Weha Transportasi 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 Weha Transportasi 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 Weha Transportasi i.e., Weha Transportasi and Transcoal Pacific go up and down completely randomly.

Pair Corralation between Weha Transportasi and Transcoal Pacific

Assuming the 90 days trading horizon Weha Transportasi Indonesia is expected to under-perform the Transcoal Pacific. In addition to that, Weha Transportasi is 1.02 times more volatile than Transcoal Pacific Tbk. It trades about -0.09 of its total potential returns per unit of risk. Transcoal Pacific Tbk is currently generating about 0.02 per unit of volatility. If you would invest  685,000  in Transcoal Pacific Tbk on September 15, 2024 and sell it today you would earn a total of  5,000  from holding Transcoal Pacific Tbk or generate 0.73% return on investment over 90 days.

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

Weha Transportasi Indonesia  vs.  Transcoal Pacific Tbk

Weha Transportasi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Weha Transportasi Indonesia 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.

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 Weha Transportasi and Transcoal Pacific

The main advantage of trading using opposite Weha Transportasi and Transcoal Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weha Transportasi 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 Weha Transportasi 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.