Correlation Between Nanotech Indonesia and Indonesian Tobacco
Can any of the company-specific risk be diversified away by investing in both Nanotech Indonesia 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 Nanotech Indonesia and Indonesian Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nanotech Indonesia Global and Indonesian Tobacco Tbk, you can compare the effects of market volatilities on Nanotech Indonesia 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 Nanotech Indonesia with a short position of Indonesian Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nanotech Indonesia and Indonesian Tobacco.
Diversification Opportunities for Nanotech Indonesia and Indonesian Tobacco
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Nanotech and Indonesian is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Nanotech Indonesia Global 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 Nanotech Indonesia 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 Nanotech Indonesia Global 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 Nanotech Indonesia i.e., Nanotech Indonesia and Indonesian Tobacco go up and down completely randomly.
Pair Corralation between Nanotech Indonesia and Indonesian Tobacco
Assuming the 90 days trading horizon Nanotech Indonesia Global is expected to generate 2.04 times more return on investment than Indonesian Tobacco. However, Nanotech Indonesia is 2.04 times more volatile than Indonesian Tobacco Tbk. It trades about 0.27 of its potential returns per unit of risk. Indonesian Tobacco Tbk is currently generating about -0.03 per unit of risk. If you would invest 1,800 in Nanotech Indonesia Global on August 30, 2024 and sell it today you would earn a total of 400.00 from holding Nanotech Indonesia Global or generate 22.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nanotech Indonesia Global vs. Indonesian Tobacco Tbk
Performance |
| Timeline |
| Nanotech Indonesia Global |
| Indonesian Tobacco Tbk |
Nanotech Indonesia and Indonesian Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nanotech Indonesia and Indonesian Tobacco
The main advantage of trading using opposite Nanotech Indonesia and Indonesian Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nanotech Indonesia 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.| Nanotech Indonesia vs. Sumber Tani Agung | Nanotech Indonesia vs. Dayamitra Telekomunikasi PT | Nanotech Indonesia vs. Wahana Inti MakmurTbk | Nanotech Indonesia vs. Wir Asia Tbk |
| 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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