Correlation Between Indocement Tunggal and United Tractors
Can any of the company-specific risk be diversified away by investing in both Indocement Tunggal and United Tractors 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 Indocement Tunggal and United Tractors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Indocement Tunggal Prakarsa and United Tractors Tbk, you can compare the effects of market volatilities on Indocement Tunggal and United Tractors 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 Indocement Tunggal with a short position of United Tractors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indocement Tunggal and United Tractors.
Diversification Opportunities for Indocement Tunggal and United Tractors
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Indocement and United is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Indocement Tunggal Prakarsa and United Tractors Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Tractors Tbk and Indocement Tunggal 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 Indocement Tunggal Prakarsa are associated (or correlated) with United Tractors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Tractors Tbk has no effect on the direction of Indocement Tunggal i.e., Indocement Tunggal and United Tractors go up and down completely randomly.
Pair Corralation between Indocement Tunggal and United Tractors
Assuming the 90 days trading horizon Indocement Tunggal Prakarsa is expected to under-perform the United Tractors. But the stock apears to be less risky and, when comparing its historical volatility, Indocement Tunggal Prakarsa is 1.19 times less risky than United Tractors. The stock trades about -0.23 of its potential returns per unit of risk. The United Tractors Tbk is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,680,000 in United Tractors Tbk on August 28, 2024 and sell it today you would earn a total of 70,000 from holding United Tractors Tbk or generate 2.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Indocement Tunggal Prakarsa vs. United Tractors Tbk
Performance |
| Timeline |
| Indocement Tunggal |
| United Tractors Tbk |
Indocement Tunggal and United Tractors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Indocement Tunggal and United Tractors
The main advantage of trading using opposite Indocement Tunggal and United Tractors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indocement Tunggal position performs unexpectedly, United Tractors 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 United Tractors will offset losses from the drop in United Tractors' long position.| Indocement Tunggal vs. Kedaung Indah Can | Indocement Tunggal vs. Langgeng Makmur Industri | Indocement Tunggal vs. Kabelindo Murni Tbk | Indocement Tunggal vs. Mustika Ratu 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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