Correlation Between Transcoal Pacific and Indonesian Tobacco
Can any of the company-specific risk be diversified away by investing in both Transcoal Pacific 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 Transcoal Pacific and Indonesian Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Transcoal Pacific Tbk and Indonesian Tobacco Tbk, you can compare the effects of market volatilities on Transcoal Pacific 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 Transcoal Pacific with a short position of Indonesian Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transcoal Pacific and Indonesian Tobacco.
Diversification Opportunities for Transcoal Pacific and Indonesian Tobacco
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Transcoal and Indonesian is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Transcoal Pacific 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 Transcoal Pacific 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 Transcoal Pacific 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 Transcoal Pacific i.e., Transcoal Pacific and Indonesian Tobacco go up and down completely randomly.
Pair Corralation between Transcoal Pacific and Indonesian Tobacco
Assuming the 90 days trading horizon Transcoal Pacific Tbk is expected to generate 1.72 times more return on investment than Indonesian Tobacco. However, Transcoal Pacific is 1.72 times more volatile than Indonesian Tobacco Tbk. It trades about -0.02 of its potential returns per unit of risk. Indonesian Tobacco Tbk is currently generating about -0.04 per unit of risk. If you would invest 796,497 in Transcoal Pacific Tbk on August 26, 2024 and sell it today you would lose (106,497) from holding Transcoal Pacific Tbk or give up 13.37% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Transcoal Pacific Tbk vs. Indonesian Tobacco Tbk
Performance |
| Timeline |
| Transcoal Pacific Tbk |
| Indonesian Tobacco Tbk |
Transcoal Pacific and Indonesian Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transcoal Pacific and Indonesian Tobacco
The main advantage of trading using opposite Transcoal Pacific and Indonesian Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transcoal Pacific 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.| Transcoal Pacific vs. Rukun Raharja Tbk | Transcoal Pacific vs. PT Temas Tbk | Transcoal Pacific vs. Weha Transportasi Indonesia |
| Indonesian Tobacco vs. Transcoal Pacific Tbk | Indonesian Tobacco vs. Garudafood Putra Putri | Indonesian Tobacco vs. Provident Agro Tbk | Indonesian Tobacco vs. Bhuwanatala Indah Permai |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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