Correlation Between PT Indosat and Air Lease

Can any of the company-specific risk be diversified away by investing in both PT Indosat and Air Lease 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 PT Indosat and Air Lease into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PT Indosat Tbk and Air Lease, you can compare the effects of market volatilities on PT Indosat and Air Lease 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 PT Indosat with a short position of Air Lease. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Indosat and Air Lease.

Diversification Opportunities for PT Indosat and Air Lease

-0.62

Correlation Coefficient

PT Indosat  Air Lease

Excellent diversification

The 3 months correlation between IDO1 and Air is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding PT Indosat Tbk and Air Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Lease and PT Indosat 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 PT Indosat Tbk are associated (or correlated) with Air Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Lease has no effect on the direction of PT Indosat i.e., PT Indosat and Air Lease go up and down completely randomly.

Pair Corralation between PT Indosat and Air Lease

Assuming the 90 days trading horizon PT Indosat is expected to generate 2.42 times less return on investment than Air Lease. In addition to that, PT Indosat is 5.12 times more volatile than Air Lease. It trades about 0.01 of its total potential returns per unit of risk. Air Lease is currently generating about 0.18 per unit of volatility. If you would invest  4,038  in Air Lease on August 28, 2024 and sell it today you would earn a total of  802.00  from holding Air Lease or generate 19.86% return on investment over 90 days.

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

PT Indosat Tbk  vs.  Air Lease

PT Indosat Tbk

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PT Indosat Tbk are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PT Indosat may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Air Lease

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Lease are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady essential indicators, Air Lease reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Indosat and Air Lease

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

The idea behind PT Indosat Tbk and Air Lease 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.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.