Correlation Between Intanwijaya Internasional and Transcoal Pacific
Can any of the company-specific risk be diversified away by investing in both Intanwijaya Internasional 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 Intanwijaya Internasional and Transcoal Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Intanwijaya Internasional Tbk and Transcoal Pacific Tbk, you can compare the effects of market volatilities on Intanwijaya Internasional 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 Intanwijaya Internasional with a short position of Transcoal Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intanwijaya Internasional and Transcoal Pacific.
Diversification Opportunities for Intanwijaya Internasional and Transcoal Pacific
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Intanwijaya and Transcoal is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Intanwijaya Internasional Tbk 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 Intanwijaya Internasional 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 Intanwijaya Internasional Tbk 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 Intanwijaya Internasional i.e., Intanwijaya Internasional and Transcoal Pacific go up and down completely randomly.
Pair Corralation between Intanwijaya Internasional and Transcoal Pacific
Assuming the 90 days trading horizon Intanwijaya Internasional Tbk is expected to under-perform the Transcoal Pacific. But the stock apears to be less risky and, when comparing its historical volatility, Intanwijaya Internasional Tbk is 1.96 times less risky than Transcoal Pacific. The stock trades about -0.09 of its potential returns per unit of risk. The Transcoal Pacific Tbk is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 697,500 in Transcoal Pacific Tbk on September 13, 2024 and sell it today you would lose (5,000) from holding Transcoal Pacific Tbk or give up 0.72% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Intanwijaya Internasional Tbk vs. Transcoal Pacific Tbk
Performance |
| Timeline |
| Intanwijaya Internasional |
| Transcoal Pacific Tbk |
Intanwijaya Internasional and Transcoal Pacific Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Intanwijaya Internasional and Transcoal Pacific
The main advantage of trading using opposite Intanwijaya Internasional and Transcoal Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intanwijaya Internasional 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 Intanwijaya Internasional Tbk 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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Check out your portfolio center.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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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