Correlation Between Mustika Ratu and Indal Aluminium
Can any of the company-specific risk be diversified away by investing in both Mustika Ratu and Indal Aluminium 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 Mustika Ratu and Indal Aluminium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mustika Ratu Tbk and Indal Aluminium Industry, you can compare the effects of market volatilities on Mustika Ratu and Indal Aluminium 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 Mustika Ratu with a short position of Indal Aluminium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mustika Ratu and Indal Aluminium.
Diversification Opportunities for Mustika Ratu and Indal Aluminium
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Mustika and Indal is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Mustika Ratu Tbk and Indal Aluminium Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indal Aluminium Industry and Mustika Ratu 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 Mustika Ratu Tbk are associated (or correlated) with Indal Aluminium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indal Aluminium Industry has no effect on the direction of Mustika Ratu i.e., Mustika Ratu and Indal Aluminium go up and down completely randomly.
Pair Corralation between Mustika Ratu and Indal Aluminium
Assuming the 90 days trading horizon Mustika Ratu Tbk is expected to under-perform the Indal Aluminium. In addition to that, Mustika Ratu is 1.26 times more volatile than Indal Aluminium Industry. It trades about -0.03 of its total potential returns per unit of risk. Indal Aluminium Industry is currently generating about -0.04 per unit of volatility. If you would invest 26,400 in Indal Aluminium Industry on August 30, 2024 and sell it today you would lose (12,800) from holding Indal Aluminium Industry or give up 48.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mustika Ratu Tbk vs. Indal Aluminium Industry
Performance |
| Timeline |
| Mustika Ratu Tbk |
| Indal Aluminium Industry |
Mustika Ratu and Indal Aluminium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mustika Ratu and Indal Aluminium
The main advantage of trading using opposite Mustika Ratu and Indal Aluminium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mustika Ratu position performs unexpectedly, Indal Aluminium 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 Indal Aluminium will offset losses from the drop in Indal Aluminium's long position.| Mustika Ratu vs. Pyridam Farma Tbk | Mustika Ratu vs. Mandom Indonesia Tbk | Mustika Ratu vs. Langgeng Makmur Industri | Mustika Ratu vs. Merck Tbk |
| Indal Aluminium vs. Intanwijaya Internasional Tbk | Indal Aluminium vs. Alumindo Light Metal | Indal Aluminium vs. Champion Pacific Indonesia | Indal Aluminium vs. Betonjaya Manunggal 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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