Correlation Between First Media and Indonesian Tobacco
Can any of the company-specific risk be diversified away by investing in both First Media and Indonesian Tobacco 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 First Media and Indonesian Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Media Tbk and Indonesian Tobacco Tbk, you can compare the effects of market volatilities on First Media and Indonesian Tobacco 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 First Media with a short position of Indonesian Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Media and Indonesian Tobacco.
Diversification Opportunities for First Media and Indonesian Tobacco
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between First and Indonesian is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding First Media Tbk and Indonesian Tobacco Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indonesian Tobacco Tbk and First Media 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 First Media Tbk are associated (or correlated) with Indonesian Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indonesian Tobacco Tbk has no effect on the direction of First Media i.e., First Media and Indonesian Tobacco go up and down completely randomly.
Pair Corralation between First Media and Indonesian Tobacco
Assuming the 90 days trading horizon First Media Tbk is expected to under-perform the Indonesian Tobacco. In addition to that, First Media is 2.04 times more volatile than Indonesian Tobacco Tbk. It trades about -0.23 of its total potential returns per unit of risk. Indonesian Tobacco Tbk is currently generating about -0.03 per unit of volatility. If you would invest 25,000 in Indonesian Tobacco Tbk on October 23, 2024 and sell it today you would lose (200.00) from holding Indonesian Tobacco Tbk or give up 0.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Media Tbk vs. Indonesian Tobacco Tbk
Performance |
| Timeline |
| First Media Tbk |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Modest
| Indonesian Tobacco Tbk |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
First Media and Indonesian Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Media and Indonesian Tobacco
The main advantage of trading using opposite First Media and Indonesian Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Media position performs unexpectedly, Indonesian Tobacco 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 Indonesian Tobacco will offset losses from the drop in Indonesian Tobacco's long position.| First Media vs. Garuda Metalindo Tbk | First Media vs. Alumindo Light Metal | First Media vs. Smartfren Telecom Tbk | First Media vs. Ace Hardware Indonesia |
| Indonesian Tobacco vs. Wismilak Inti Makmur | Indonesian Tobacco vs. J Resources Asia | Indonesian Tobacco vs. Transcoal Pacific Tbk | Indonesian Tobacco vs. Garudafood Putra Putri |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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