Correlation Between First Media and Merck Tbk
Can any of the company-specific risk be diversified away by investing in both First Media and Merck Tbk 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 Media and Merck Tbk into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Media Tbk and Merck Tbk, you can compare the effects of market volatilities on First Media and Merck Tbk 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 Media with a short position of Merck Tbk. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Media and Merck Tbk.
Diversification Opportunities for First Media and Merck Tbk
-0.89 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between First and Merck is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding First Media Tbk and Merck Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Tbk and First Media 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 Media Tbk are associated (or correlated) with Merck Tbk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merck Tbk has no effect on the direction of First Media i.e., First Media and Merck Tbk go up and down completely randomly.
Pair Corralation between First Media and Merck Tbk
Assuming the 90 days trading horizon First Media Tbk is expected to generate 4.54 times more return on investment than Merck Tbk. However, First Media is 4.54 times more volatile than Merck Tbk. It trades about 0.01 of its potential returns per unit of risk. Merck Tbk is currently generating about -0.04 per unit of risk. If you would invest 10,700 in First Media Tbk on August 30, 2024 and sell it today you would lose (900.00) from holding First Media Tbk or give up 8.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Media Tbk vs. Merck Tbk
Performance |
| Timeline |
| First Media Tbk |
| Merck Tbk |
First Media and Merck Tbk Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Media and Merck Tbk
The main advantage of trading using opposite First Media and Merck Tbk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Media position performs unexpectedly, Merck Tbk 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 Merck Tbk will offset losses from the drop in Merck Tbk's long position.| First Media vs. Bank Artos Indonesia | First Media vs. PT Bukalapak | First Media vs. Sumber Alfaria Trijaya | First Media vs. Merdeka Copper Gold |
| Merck Tbk vs. Merdeka Copper Gold | Merck Tbk vs. Tower Bersama Infrastructure | Merck Tbk vs. Erajaya Swasembada Tbk | Merck Tbk vs. Surya Citra Media |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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