Correlation Between Vale Indonesia and Merdeka Copper
Can any of the company-specific risk be diversified away by investing in both Vale Indonesia and Merdeka Copper 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 Merdeka Copper 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 Merdeka Copper Gold, you can compare the effects of market volatilities on Vale Indonesia and Merdeka Copper 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 Merdeka Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale Indonesia and Merdeka Copper.
Diversification Opportunities for Vale Indonesia and Merdeka Copper
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vale and Merdeka is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Vale Indonesia Tbk and Merdeka Copper Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merdeka Copper Gold 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 Merdeka Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merdeka Copper Gold has no effect on the direction of Vale Indonesia i.e., Vale Indonesia and Merdeka Copper go up and down completely randomly.
Pair Corralation between Vale Indonesia and Merdeka Copper
Assuming the 90 days trading horizon Vale Indonesia Tbk is expected to generate 0.78 times more return on investment than Merdeka Copper. However, Vale Indonesia Tbk is 1.27 times less risky than Merdeka Copper. It trades about -0.06 of its potential returns per unit of risk. Merdeka Copper Gold is currently generating about -0.05 per unit of risk. If you would invest 734,999 in Vale Indonesia Tbk on September 2, 2024 and sell it today you would lose (374,999) from holding Vale Indonesia Tbk or give up 51.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vale Indonesia Tbk vs. Merdeka Copper Gold
Performance |
| Timeline |
| Vale Indonesia Tbk |
| Merdeka Copper Gold |
Vale Indonesia and Merdeka Copper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vale Indonesia and Merdeka Copper
The main advantage of trading using opposite Vale Indonesia and Merdeka Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vale Indonesia position performs unexpectedly, Merdeka Copper 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 Merdeka Copper will offset losses from the drop in Merdeka Copper'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 |
| Merdeka Copper vs. Perusahaan Gas Negara | Merdeka Copper vs. Telkom Indonesia Tbk | Merdeka Copper vs. Mitra Pinasthika Mustika | Merdeka Copper vs. Jakarta Int Hotels |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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