Correlation Between Indah Kiat and Medco Energi
Can any of the company-specific risk be diversified away by investing in both Indah Kiat 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 Indah Kiat and Medco Energi into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Indah Kiat Pulp and Medco Energi Internasional, you can compare the effects of market volatilities on Indah Kiat 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 Indah Kiat with a short position of Medco Energi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indah Kiat and Medco Energi.
Diversification Opportunities for Indah Kiat and Medco Energi
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Indah and Medco is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Indah Kiat Pulp 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 Indah Kiat 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 Indah Kiat Pulp 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 Indah Kiat i.e., Indah Kiat and Medco Energi go up and down completely randomly.
Pair Corralation between Indah Kiat and Medco Energi
Assuming the 90 days trading horizon Indah Kiat is expected to generate 3.63 times less return on investment than Medco Energi. But when comparing it to its historical volatility, Indah Kiat Pulp is 1.35 times less risky than Medco Energi. It trades about 0.01 of its potential returns per unit of risk. Medco Energi Internasional is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 86,892 in Medco Energi Internasional on August 29, 2024 and sell it today you would earn a total of 25,608 from holding Medco Energi Internasional or generate 29.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Indah Kiat Pulp vs. Medco Energi Internasional
Performance |
| Timeline |
| Indah Kiat Pulp |
| Medco Energi Interna |
Indah Kiat and Medco Energi Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Indah Kiat and Medco Energi
The main advantage of trading using opposite Indah Kiat and Medco Energi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indah Kiat 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.| Indah Kiat vs. Kedaung Indah Can | Indah Kiat vs. Langgeng Makmur Industri | Indah Kiat vs. Kabelindo Murni Tbk | Indah Kiat vs. Mustika Ratu Tbk |
| Medco Energi vs. Vale Indonesia Tbk | Medco Energi vs. Timah Persero Tbk | Medco Energi vs. Perusahaan Gas Negara | Medco Energi vs. Bukit Asam 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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