Correlation Between Indonesian Tobacco and Merdeka Copper
Can any of the company-specific risk be diversified away by investing in both Indonesian Tobacco 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 Indonesian Tobacco and Merdeka Copper into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Indonesian Tobacco Tbk and Merdeka Copper Gold, you can compare the effects of market volatilities on Indonesian Tobacco 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 Indonesian Tobacco with a short position of Merdeka Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indonesian Tobacco and Merdeka Copper.
Diversification Opportunities for Indonesian Tobacco and Merdeka Copper
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Indonesian and Merdeka is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Indonesian Tobacco 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 Indonesian Tobacco 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 Indonesian Tobacco 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 Indonesian Tobacco i.e., Indonesian Tobacco and Merdeka Copper go up and down completely randomly.
Pair Corralation between Indonesian Tobacco and Merdeka Copper
Assuming the 90 days trading horizon Indonesian Tobacco Tbk is expected to generate 0.66 times more return on investment than Merdeka Copper. However, Indonesian Tobacco Tbk is 1.51 times less risky than Merdeka Copper. It trades about 0.02 of its potential returns per unit of risk. Merdeka Copper Gold is currently generating about -0.17 per unit of risk. If you would invest 26,000 in Indonesian Tobacco Tbk on September 3, 2024 and sell it today you would earn a total of 400.00 from holding Indonesian Tobacco Tbk or generate 1.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Indonesian Tobacco Tbk vs. Merdeka Copper Gold
Performance |
| Timeline |
| Indonesian Tobacco Tbk |
| Merdeka Copper Gold |
Indonesian Tobacco and Merdeka Copper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Indonesian Tobacco and Merdeka Copper
The main advantage of trading using opposite Indonesian Tobacco and Merdeka Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indonesian Tobacco 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.| Indonesian Tobacco vs. J Resources Asia | Indonesian Tobacco vs. Garudafood Putra Putri | Indonesian Tobacco vs. Provident Agro Tbk | Indonesian Tobacco vs. Mitra Pinasthika Mustika |
| Merdeka Copper vs. Timah Persero Tbk | Merdeka Copper vs. Semen Indonesia Persero | 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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