Correlation Between Kimia Farma and Matahari Department
Can any of the company-specific risk be diversified away by investing in both Kimia Farma and Matahari Department 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 Kimia Farma and Matahari Department into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kimia Farma Persero and Matahari Department Store, you can compare the effects of market volatilities on Kimia Farma and Matahari Department 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 Kimia Farma with a short position of Matahari Department. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kimia Farma and Matahari Department.
Diversification Opportunities for Kimia Farma and Matahari Department
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Kimia and Matahari is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Kimia Farma Persero and Matahari Department Store in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matahari Department Store and Kimia Farma 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 Kimia Farma Persero are associated (or correlated) with Matahari Department. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matahari Department Store has no effect on the direction of Kimia Farma i.e., Kimia Farma and Matahari Department go up and down completely randomly.
Pair Corralation between Kimia Farma and Matahari Department
Assuming the 90 days trading horizon Kimia Farma Persero is expected to under-perform the Matahari Department. In addition to that, Kimia Farma is 1.8 times more volatile than Matahari Department Store. It trades about -0.02 of its total potential returns per unit of risk. Matahari Department Store is currently generating about -0.03 per unit of volatility. If you would invest 152,000 in Matahari Department Store on September 3, 2024 and sell it today you would lose (11,000) from holding Matahari Department Store or give up 7.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kimia Farma Persero vs. Matahari Department Store
Performance |
| Timeline |
| Kimia Farma Persero |
| Matahari Department Store |
Kimia Farma and Matahari Department Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kimia Farma and Matahari Department
The main advantage of trading using opposite Kimia Farma and Matahari Department positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kimia Farma position performs unexpectedly, Matahari Department 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 Matahari Department will offset losses from the drop in Matahari Department's long position.| Kimia Farma vs. Indofarma Tbk | Kimia Farma vs. Kalbe Farma Tbk | Kimia Farma vs. Wijaya Karya Beton | Kimia Farma vs. Adhi Karya Persero |
| Matahari Department vs. Surya Citra Media | Matahari Department vs. Akr Corporindo Tbk | Matahari Department vs. Media Nusantara Citra | Matahari Department vs. Pembangunan Perumahan PT |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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