Correlation Between Matahari Department and Merck Tbk
Can any of the company-specific risk be diversified away by investing in both Matahari Department 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 Matahari Department and Merck Tbk into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Matahari Department Store and Merck Tbk, you can compare the effects of market volatilities on Matahari Department 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 Matahari Department with a short position of Merck Tbk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matahari Department and Merck Tbk.
Diversification Opportunities for Matahari Department and Merck Tbk
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Matahari and Merck is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Matahari Department Store and Merck Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Tbk and Matahari Department 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 Matahari Department Store 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 Matahari Department i.e., Matahari Department and Merck Tbk go up and down completely randomly.
Pair Corralation between Matahari Department and Merck Tbk
Assuming the 90 days trading horizon Matahari Department Store is expected to under-perform the Merck Tbk. In addition to that, Matahari Department is 3.5 times more volatile than Merck Tbk. It trades about -0.07 of its total potential returns per unit of risk. Merck Tbk is currently generating about -0.04 per unit of volatility. If you would invest 405,676 in Merck Tbk on September 2, 2024 and sell it today you would lose (62,676) from holding Merck Tbk or give up 15.45% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Matahari Department Store vs. Merck Tbk
Performance |
| Timeline |
| Matahari Department Store |
| Merck Tbk |
Matahari Department and Merck Tbk Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Matahari Department and Merck Tbk
The main advantage of trading using opposite Matahari Department and Merck Tbk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Matahari Department 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.| Matahari Department vs. Japfa Comfeed Indonesia | Matahari Department vs. Charoen Pokphand Indonesia | Matahari Department vs. Erajaya Swasembada Tbk | Matahari Department vs. Indofood Cbp Sukses |
| Merck Tbk vs. Matahari Department Store | Merck Tbk vs. Surya Citra Media | Merck Tbk vs. Lippo Karawaci Tbk |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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