Correlation Between Vale Indonesia and Eratex Djaja
Can any of the company-specific risk be diversified away by investing in both Vale Indonesia and Eratex Djaja 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 Eratex Djaja 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 Eratex Djaja Tbk, you can compare the effects of market volatilities on Vale Indonesia and Eratex Djaja 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 Eratex Djaja. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale Indonesia and Eratex Djaja.
Diversification Opportunities for Vale Indonesia and Eratex Djaja
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Vale and Eratex is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Vale Indonesia Tbk and Eratex Djaja Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eratex Djaja 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 Eratex Djaja. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eratex Djaja Tbk has no effect on the direction of Vale Indonesia i.e., Vale Indonesia and Eratex Djaja go up and down completely randomly.
Pair Corralation between Vale Indonesia and Eratex Djaja
Assuming the 90 days trading horizon Vale Indonesia Tbk is expected to under-perform the Eratex Djaja. But the stock apears to be less risky and, when comparing its historical volatility, Vale Indonesia Tbk is 5.49 times less risky than Eratex Djaja. The stock trades about -0.17 of its potential returns per unit of risk. The Eratex Djaja Tbk is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 8,900 in Eratex Djaja Tbk on September 1, 2024 and sell it today you would earn a total of 1,300 from holding Eratex Djaja Tbk or generate 14.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Vale Indonesia Tbk vs. Eratex Djaja Tbk
Performance |
| Timeline |
| Vale Indonesia Tbk |
| Eratex Djaja Tbk |
Vale Indonesia and Eratex Djaja Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vale Indonesia and Eratex Djaja
The main advantage of trading using opposite Vale Indonesia and Eratex Djaja positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vale Indonesia position performs unexpectedly, Eratex Djaja 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 Eratex Djaja will offset losses from the drop in Eratex Djaja's long position.| Vale Indonesia vs. Perusahaan Gas Negara | Vale Indonesia vs. Telkom Indonesia Tbk | Vale Indonesia vs. Mitra Pinasthika Mustika | Vale Indonesia vs. Jakarta Int Hotels |
| Eratex Djaja vs. Ever Shine Textile | Eratex Djaja vs. PT Century Textile | Eratex Djaja vs. Argo Pantes Tbk | Eratex Djaja vs. Primarindo Asia Infrastructure |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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