Correlation Between Mustika Ratu and Indah Kiat
Can any of the company-specific risk be diversified away by investing in both Mustika Ratu and Indah Kiat 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 Indah Kiat 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 Indah Kiat Pulp, you can compare the effects of market volatilities on Mustika Ratu and Indah Kiat 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 Indah Kiat. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mustika Ratu and Indah Kiat.
Diversification Opportunities for Mustika Ratu and Indah Kiat
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Mustika and Indah is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Mustika Ratu Tbk and Indah Kiat Pulp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indah Kiat Pulp 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 Indah Kiat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indah Kiat Pulp has no effect on the direction of Mustika Ratu i.e., Mustika Ratu and Indah Kiat go up and down completely randomly.
Pair Corralation between Mustika Ratu and Indah Kiat
Assuming the 90 days trading horizon Mustika Ratu Tbk is expected to under-perform the Indah Kiat. In addition to that, Mustika Ratu is 1.32 times more volatile than Indah Kiat Pulp. It trades about -0.34 of its total potential returns per unit of risk. Indah Kiat Pulp is currently generating about -0.33 per unit of volatility. If you would invest 810,000 in Indah Kiat Pulp on August 24, 2024 and sell it today you would lose (97,500) from holding Indah Kiat Pulp or give up 12.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Mustika Ratu Tbk vs. Indah Kiat Pulp
Performance |
| Timeline |
| Mustika Ratu Tbk |
| Indah Kiat Pulp |
Mustika Ratu and Indah Kiat Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mustika Ratu and Indah Kiat
The main advantage of trading using opposite Mustika Ratu and Indah Kiat positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mustika Ratu position performs unexpectedly, Indah Kiat 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 Indah Kiat will offset losses from the drop in Indah Kiat'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 |
| Indah Kiat vs. Kedaung Indah Can | Indah Kiat vs. Langgeng Makmur Industri | Indah Kiat vs. Kabelindo Murni Tbk | Indah Kiat vs. Mustika Ratu 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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