Correlation Between Perusahaan Perkebunan and Vale Indonesia
Can any of the company-specific risk be diversified away by investing in both Perusahaan Perkebunan and Vale 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 Perusahaan Perkebunan and Vale Indonesia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Perusahaan Perkebunan London and Vale Indonesia Tbk, you can compare the effects of market volatilities on Perusahaan Perkebunan and Vale 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 Perusahaan Perkebunan with a short position of Vale Indonesia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Perusahaan Perkebunan and Vale Indonesia.
Diversification Opportunities for Perusahaan Perkebunan and Vale Indonesia
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Perusahaan and Vale is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Perusahaan Perkebunan London and Vale Indonesia Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale Indonesia Tbk and Perusahaan Perkebunan 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 Perusahaan Perkebunan London are associated (or correlated) with Vale Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vale Indonesia Tbk has no effect on the direction of Perusahaan Perkebunan i.e., Perusahaan Perkebunan and Vale Indonesia go up and down completely randomly.
Pair Corralation between Perusahaan Perkebunan and Vale Indonesia
Assuming the 90 days trading horizon Perusahaan Perkebunan London is expected to under-perform the Vale Indonesia. In addition to that, Perusahaan Perkebunan is 1.76 times more volatile than Vale Indonesia Tbk. It trades about -0.27 of its total potential returns per unit of risk. Vale Indonesia Tbk is currently generating about -0.28 per unit of volatility. If you would invest 407,000 in Vale Indonesia Tbk on August 26, 2024 and sell it today you would lose (41,000) from holding Vale Indonesia Tbk or give up 10.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Perusahaan Perkebunan London vs. Vale Indonesia Tbk
Performance |
| Timeline |
| Perusahaan Perkebunan |
| Vale Indonesia Tbk |
Perusahaan Perkebunan and Vale Indonesia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Perusahaan Perkebunan and Vale Indonesia
The main advantage of trading using opposite Perusahaan Perkebunan and Vale Indonesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Perusahaan Perkebunan position performs unexpectedly, Vale 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 Vale Indonesia will offset losses from the drop in Vale Indonesia's long position.| Perusahaan Perkebunan vs. Charoen Pokphand Indonesia | Perusahaan Perkebunan vs. Kalbe Farma Tbk | Perusahaan Perkebunan vs. Indofood Cbp Sukses | Perusahaan Perkebunan vs. Akr Corporindo Tbk |
| Vale Indonesia vs. Kedaung Indah Can | Vale Indonesia vs. Langgeng Makmur Industri | Vale Indonesia vs. Kabelindo Murni Tbk | Vale Indonesia 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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