Correlation Between Vale Indonesia and Pelayaran Nasional

Can any of the company-specific risk be diversified away by investing in both Vale Indonesia and Pelayaran Nasional 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 Vale Indonesia and Pelayaran Nasional into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vale Indonesia Tbk and Pelayaran Nasional Bina, you can compare the effects of market volatilities on Vale Indonesia and Pelayaran Nasional 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 Vale Indonesia with a short position of Pelayaran Nasional. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale Indonesia and Pelayaran Nasional.

Diversification Opportunities for Vale Indonesia and Pelayaran Nasional

0.49

Correlation Coefficient

Vale Indonesia  Pelayaran Nasional

Very weak diversification

The 3 months correlation between Vale and Pelayaran is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Vale Indonesia Tbk and Pelayaran Nasional Bina in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pelayaran Nasional Bina and Vale 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 Vale Indonesia Tbk are associated (or correlated) with Pelayaran Nasional. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pelayaran Nasional Bina has no effect on the direction of Vale Indonesia i.e., Vale Indonesia and Pelayaran Nasional go up and down completely randomly.

Pair Corralation between Vale Indonesia and Pelayaran Nasional

Assuming the 90 days trading horizon Vale Indonesia is expected to generate 4.35 times less return on investment than Pelayaran Nasional. In addition to that, Vale Indonesia is 1.04 times more volatile than Pelayaran Nasional Bina. It trades about 0.02 of its total potential returns per unit of risk. Pelayaran Nasional Bina is currently generating about 0.1 per unit of volatility. If you would invest  6,400  in Pelayaran Nasional Bina on January 29, 2024 and sell it today you would earn a total of  500.00  from holding Pelayaran Nasional Bina or generate 7.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Vale Indonesia Tbk  vs.  Pelayaran Nasional Bina

Vale Indonesia Tbk

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vale Indonesia Tbk are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Vale Indonesia may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pelayaran Nasional Bina

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pelayaran Nasional Bina are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Pelayaran Nasional may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Vale Indonesia and Pelayaran Nasional

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

The idea behind Vale Indonesia Tbk and Pelayaran Nasional Bina 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.