Correlation Between Lion Metal and Mustika Ratu
Can any of the company-specific risk be diversified away by investing in both Lion Metal and Mustika Ratu 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 Lion Metal and Mustika Ratu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lion Metal Works and Mustika Ratu Tbk, you can compare the effects of market volatilities on Lion Metal and Mustika Ratu 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 Lion Metal with a short position of Mustika Ratu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lion Metal and Mustika Ratu.
Diversification Opportunities for Lion Metal and Mustika Ratu
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Lion and Mustika is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Lion Metal Works and Mustika Ratu Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mustika Ratu Tbk and Lion Metal 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 Lion Metal Works are associated (or correlated) with Mustika Ratu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mustika Ratu Tbk has no effect on the direction of Lion Metal i.e., Lion Metal and Mustika Ratu go up and down completely randomly.
Pair Corralation between Lion Metal and Mustika Ratu
Assuming the 90 days trading horizon Lion Metal Works is expected to under-perform the Mustika Ratu. In addition to that, Lion Metal is 1.1 times more volatile than Mustika Ratu Tbk. It trades about -0.03 of its total potential returns per unit of risk. Mustika Ratu Tbk is currently generating about -0.03 per unit of volatility. If you would invest 59,500 in Mustika Ratu Tbk on August 28, 2024 and sell it today you would lose (27,300) from holding Mustika Ratu Tbk or give up 45.88% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lion Metal Works vs. Mustika Ratu Tbk
Performance |
| Timeline |
| Lion Metal Works |
| Mustika Ratu Tbk |
Lion Metal and Mustika Ratu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lion Metal and Mustika Ratu
The main advantage of trading using opposite Lion Metal and Mustika Ratu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lion Metal position performs unexpectedly, Mustika Ratu 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 Mustika Ratu will offset losses from the drop in Mustika Ratu's long position.The idea behind Lion Metal Works and Mustika Ratu Tbk 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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