Correlation Between Integra Indocabinet and Perusahaan Gas

Can any of the company-specific risk be diversified away by investing in both Integra Indocabinet and Perusahaan Gas 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 Integra Indocabinet and Perusahaan Gas into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Integra Indocabinet Tbk and Perusahaan Gas Negara, you can compare the effects of market volatilities on Integra Indocabinet and Perusahaan Gas 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 Integra Indocabinet with a short position of Perusahaan Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Integra Indocabinet and Perusahaan Gas.

Diversification Opportunities for Integra Indocabinet and Perusahaan Gas

0.71

Correlation Coefficient

Integra Indocabinet  Perusahaan Gas

Poor diversification

The 3 months correlation between Integra and Perusahaan is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Integra Indocabinet Tbk and Perusahaan Gas Negara in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perusahaan Gas Negara and Integra Indocabinet 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 Integra Indocabinet Tbk are associated (or correlated) with Perusahaan Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perusahaan Gas Negara has no effect on the direction of Integra Indocabinet i.e., Integra Indocabinet and Perusahaan Gas go up and down completely randomly.

Pair Corralation between Integra Indocabinet and Perusahaan Gas

Assuming the 90 days trading horizon Integra Indocabinet Tbk is expected to generate 2.15 times more return on investment than Perusahaan Gas. However, Integra Indocabinet is 2.15 times more volatile than Perusahaan Gas Negara. It trades about 0.11 of its potential returns per unit of risk. Perusahaan Gas Negara is currently generating about 0.02 per unit of risk. If you would invest  19,700  in Integra Indocabinet Tbk on September 29, 2024 and sell it today you would earn a total of  10,700  from holding Integra Indocabinet Tbk or generate 54.31% return on investment over 90 days.

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

Integra Indocabinet Tbk  vs.  Perusahaan Gas Negara

Integra Indocabinet Tbk

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Integra Indocabinet Tbk are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Integra Indocabinet disclosed solid returns over the last few months and may actually be approaching a breakup point.

Perusahaan Gas Negara

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Perusahaan Gas Negara are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Perusahaan Gas may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Integra Indocabinet and Perusahaan Gas

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

The idea behind Integra Indocabinet Tbk and Perusahaan Gas Negara 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.