Correlation Between Era Mandiri and Diamond Citra

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Can any of the company-specific risk be diversified away by investing in both Era Mandiri and Diamond Citra 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 Era Mandiri and Diamond Citra into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Era Mandiri Cemerlang and Diamond Citra Propertindo, you can compare the effects of market volatilities on Era Mandiri and Diamond Citra 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 Era Mandiri with a short position of Diamond Citra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Era Mandiri and Diamond Citra.

Diversification Opportunities for Era Mandiri and Diamond Citra

0.65
  Correlation Coefficient

Poor diversification

The 3 months correlation between Era and Diamond is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Era Mandiri Cemerlang and Diamond Citra Propertindo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Citra Propertindo and Era Mandiri 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 Era Mandiri Cemerlang are associated (or correlated) with Diamond Citra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamond Citra Propertindo has no effect on the direction of Era Mandiri i.e., Era Mandiri and Diamond Citra go up and down completely randomly.

Pair Corralation between Era Mandiri and Diamond Citra

Assuming the 90 days trading horizon Era Mandiri Cemerlang is expected to under-perform the Diamond Citra. But the stock apears to be less risky and, when comparing its historical volatility, Era Mandiri Cemerlang is 5.72 times less risky than Diamond Citra. The stock trades about -0.64 of its potential returns per unit of risk. The Diamond Citra Propertindo is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  800.00  in Diamond Citra Propertindo on September 4, 2024 and sell it today you would lose (100.00) from holding Diamond Citra Propertindo or give up 12.5% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Era Mandiri Cemerlang  vs.  Diamond Citra Propertindo

 Performance 
       Timeline  
Era Mandiri Cemerlang 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Era Mandiri Cemerlang has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.
Diamond Citra Propertindo 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Diamond Citra Propertindo has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Era Mandiri and Diamond Citra Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Era Mandiri and Diamond Citra

The main advantage of trading using opposite Era Mandiri and Diamond Citra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Era Mandiri position performs unexpectedly, Diamond Citra 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 Diamond Citra will offset losses from the drop in Diamond Citra's long position.
The idea behind Era Mandiri Cemerlang and Diamond Citra Propertindo 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.

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