Correlation Between Vale Indonesia and Barito Pacific
Can any of the company-specific risk be diversified away by investing in both Vale Indonesia and Barito 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 Vale Indonesia and Barito Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vale Indonesia Tbk and Barito Pacific Tbk, you can compare the effects of market volatilities on Vale Indonesia and Barito 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 Vale Indonesia with a short position of Barito Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale Indonesia and Barito Pacific.
Diversification Opportunities for Vale Indonesia and Barito Pacific
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Vale and Barito is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Vale Indonesia Tbk and Barito Pacific Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barito Pacific Tbk and Vale Indonesia 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 Vale Indonesia Tbk are associated (or correlated) with Barito Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barito Pacific Tbk has no effect on the direction of Vale Indonesia i.e., Vale Indonesia and Barito Pacific go up and down completely randomly.
Pair Corralation between Vale Indonesia and Barito Pacific
Assuming the 90 days trading horizon Vale Indonesia Tbk is expected to under-perform the Barito Pacific. But the stock apears to be less risky and, when comparing its historical volatility, Vale Indonesia Tbk is 1.85 times less risky than Barito Pacific. The stock trades about -0.05 of its potential returns per unit of risk. The Barito Pacific Tbk is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 132,667 in Barito Pacific Tbk on August 25, 2024 and sell it today you would lose (52,667) from holding Barito Pacific Tbk or give up 39.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vale Indonesia Tbk vs. Barito Pacific Tbk
Performance |
| Timeline |
| Vale Indonesia Tbk |
| Barito Pacific Tbk |
Vale Indonesia and Barito Pacific Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vale Indonesia and Barito Pacific
The main advantage of trading using opposite Vale Indonesia and Barito Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vale Indonesia position performs unexpectedly, Barito 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 Barito Pacific will offset losses from the drop in Barito Pacific's long position.| Vale Indonesia vs. Timah Persero Tbk | Vale Indonesia vs. Aneka Tambang Persero | Vale Indonesia vs. Bukit Asam Tbk | Vale Indonesia vs. Perusahaan Gas Negara |
| Barito Pacific vs. Indah Kiat Pulp | Barito Pacific vs. Medco Energi Internasional | Barito Pacific vs. Vale Indonesia Tbk | Barito Pacific vs. Charoen Pokphand Indonesia |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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