Correlation Between Indonesian Tobacco and Nanotech Indonesia
Can any of the company-specific risk be diversified away by investing in both Indonesian Tobacco and Nanotech Indonesia 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 Nanotech Indonesia 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 Nanotech Indonesia Global, you can compare the effects of market volatilities on Indonesian Tobacco and Nanotech Indonesia 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 Nanotech Indonesia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indonesian Tobacco and Nanotech Indonesia.
Diversification Opportunities for Indonesian Tobacco and Nanotech Indonesia
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Indonesian and Nanotech is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Indonesian Tobacco Tbk and Nanotech Indonesia Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nanotech Indonesia Global 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 Nanotech Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nanotech Indonesia Global has no effect on the direction of Indonesian Tobacco i.e., Indonesian Tobacco and Nanotech Indonesia go up and down completely randomly.
Pair Corralation between Indonesian Tobacco and Nanotech Indonesia
Assuming the 90 days trading horizon Indonesian Tobacco Tbk is expected to under-perform the Nanotech Indonesia. But the stock apears to be less risky and, when comparing its historical volatility, Indonesian Tobacco Tbk is 2.42 times less risky than Nanotech Indonesia. The stock trades about -0.1 of its potential returns per unit of risk. The Nanotech Indonesia Global is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 1,800 in Nanotech Indonesia Global on September 2, 2024 and sell it today you would earn a total of 300.00 from holding Nanotech Indonesia Global or generate 16.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Indonesian Tobacco Tbk vs. Nanotech Indonesia Global
Performance |
| Timeline |
| Indonesian Tobacco Tbk |
| Nanotech Indonesia Global |
Indonesian Tobacco and Nanotech Indonesia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Indonesian Tobacco and Nanotech Indonesia
The main advantage of trading using opposite Indonesian Tobacco and Nanotech Indonesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indonesian Tobacco position performs unexpectedly, Nanotech Indonesia 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 Nanotech Indonesia will offset losses from the drop in Nanotech Indonesia's long position.| Indonesian Tobacco vs. Wismilak Inti Makmur | Indonesian Tobacco vs. J Resources Asia | Indonesian Tobacco vs. Transcoal Pacific Tbk | Indonesian Tobacco vs. Garudafood Putra Putri |
| Nanotech Indonesia vs. Sumber Tani Agung | Nanotech Indonesia vs. Dayamitra Telekomunikasi PT | Nanotech Indonesia vs. Wahana Inti MakmurTbk | Nanotech Indonesia vs. Wir Asia 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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