Correlation Between First Tractor and Indo Tambangraya

Can any of the company-specific risk be diversified away by investing in both First Tractor and Indo Tambangraya 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 Tractor and Indo Tambangraya into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First Tractor and Indo Tambangraya Megah, you can compare the effects of market volatilities on First Tractor and Indo Tambangraya 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 Tractor with a short position of Indo Tambangraya. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Tractor and Indo Tambangraya.

Diversification Opportunities for First Tractor and Indo Tambangraya

-0.79

Correlation Coefficient

First Tractor  Indo Tambangraya

Pay attention - limited upside

The 3 months correlation between First and Indo is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding First Tractor and Indo Tambangraya Megah in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indo Tambangraya Megah and First Tractor 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 Tractor are associated (or correlated) with Indo Tambangraya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indo Tambangraya Megah has no effect on the direction of First Tractor i.e., First Tractor and Indo Tambangraya go up and down completely randomly.

Pair Corralation between First Tractor and Indo Tambangraya

Assuming the 90 days horizon First Tractor is expected to generate 0.98 times more return on investment than Indo Tambangraya. However, First Tractor is 1.02 times less risky than Indo Tambangraya. It trades about 0.08 of its potential returns per unit of risk. Indo Tambangraya Megah is currently generating about -0.01 per unit of risk. If you would invest  63.00  in First Tractor on January 24, 2025 and sell it today you would earn a total of  11.00  from holding First Tractor or generate 17.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.88%
Values	Daily Returns

First Tractor  vs.  Indo Tambangraya Megah

First Tractor

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Tractor are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, First Tractor reported solid returns over the last few months and may actually be approaching a breakup point.

Indo Tambangraya Megah

Risk-Adjusted Performance

Very Weak

Over the last 90 days Indo Tambangraya Megah has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Indo Tambangraya is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Tractor and Indo Tambangraya

The main advantage of trading using opposite First Tractor and Indo Tambangraya positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Tractor position performs unexpectedly, Indo Tambangraya 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 Indo Tambangraya will offset losses from the drop in Indo Tambangraya's long position.

The idea behind First Tractor and Indo Tambangraya Megah pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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.