Correlation Between Merck Tbk and Ultra Jaya
Can any of the company-specific risk be diversified away by investing in both Merck Tbk and Ultra Jaya 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 Merck Tbk and Ultra Jaya into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Tbk and Ultra Jaya Milk, you can compare the effects of market volatilities on Merck Tbk and Ultra Jaya 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 Merck Tbk with a short position of Ultra Jaya. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck Tbk and Ultra Jaya.
Diversification Opportunities for Merck Tbk and Ultra Jaya
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Merck and Ultra is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Merck Tbk and Ultra Jaya Milk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultra Jaya Milk and Merck Tbk 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 Merck Tbk are associated (or correlated) with Ultra Jaya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultra Jaya Milk has no effect on the direction of Merck Tbk i.e., Merck Tbk and Ultra Jaya go up and down completely randomly.
Pair Corralation between Merck Tbk and Ultra Jaya
Assuming the 90 days trading horizon Merck Tbk is expected to under-perform the Ultra Jaya. But the stock apears to be less risky and, when comparing its historical volatility, Merck Tbk is 2.51 times less risky than Ultra Jaya. The stock trades about -0.04 of its potential returns per unit of risk. The Ultra Jaya Milk is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 136,308 in Ultra Jaya Milk on September 2, 2024 and sell it today you would earn a total of 42,692 from holding Ultra Jaya Milk or generate 31.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.79% |
| Values | Daily Returns |
Merck Tbk vs. Ultra Jaya Milk
Performance |
| Timeline |
| Merck Tbk |
| Ultra Jaya Milk |
Merck Tbk and Ultra Jaya Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck Tbk and Ultra Jaya
The main advantage of trading using opposite Merck Tbk and Ultra Jaya positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck Tbk position performs unexpectedly, Ultra Jaya 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 Ultra Jaya will offset losses from the drop in Ultra Jaya's long position.| Merck Tbk vs. Matahari Department Store | Merck Tbk vs. Surya Citra Media | Merck Tbk vs. Lippo Karawaci Tbk |
| Ultra Jaya vs. Bank BRISyariah Tbk | Ultra Jaya vs. Mitra Pinasthika Mustika | Ultra Jaya vs. Jakarta Int Hotels | Ultra Jaya vs. Indosterling Technomedia 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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