Correlation Between Indika Energy and Medco Energi
Can any of the company-specific risk be diversified away by investing in both Indika Energy and Medco Energi 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 Indika Energy and Medco Energi into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Indika Energy Tbk and Medco Energi Internasional, you can compare the effects of market volatilities on Indika Energy and Medco Energi 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 Indika Energy with a short position of Medco Energi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indika Energy and Medco Energi.
Diversification Opportunities for Indika Energy and Medco Energi
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Indika and Medco is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Indika Energy Tbk and Medco Energi Internasional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medco Energi Interna and Indika Energy 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 Indika Energy Tbk are associated (or correlated) with Medco Energi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medco Energi Interna has no effect on the direction of Indika Energy i.e., Indika Energy and Medco Energi go up and down completely randomly.
Pair Corralation between Indika Energy and Medco Energi
Assuming the 90 days trading horizon Indika Energy Tbk is expected to generate 1.14 times more return on investment than Medco Energi. However, Indika Energy is 1.14 times more volatile than Medco Energi Internasional. It trades about -0.19 of its potential returns per unit of risk. Medco Energi Internasional is currently generating about -0.25 per unit of risk. If you would invest 157,500 in Indika Energy Tbk on August 31, 2024 and sell it today you would lose (17,500) from holding Indika Energy Tbk or give up 11.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Indika Energy Tbk vs. Medco Energi Internasional
Performance |
| Timeline |
| Indika Energy Tbk |
| Medco Energi Interna |
Indika Energy and Medco Energi Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Indika Energy and Medco Energi
The main advantage of trading using opposite Indika Energy and Medco Energi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indika Energy position performs unexpectedly, Medco Energi 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 Medco Energi will offset losses from the drop in Medco Energi's long position.| Indika Energy vs. Indo Tambangraya Megah | Indika Energy vs. Adaro Energy Tbk | Indika Energy vs. Medco Energi Internasional | Indika Energy vs. Vale Indonesia Tbk |
| Medco Energi vs. Mitrabahtera Segara Sejati | Medco Energi vs. Weha Transportasi Indonesia | Medco Energi vs. Rig Tenders Tbk | Medco Energi vs. Rukun Raharja Tbk |
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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