Correlation Between Mustika Ratu and Kedaung Indah
Can any of the company-specific risk be diversified away by investing in both Mustika Ratu and Kedaung Indah 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 Kedaung Indah 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 Kedaung Indah Can, you can compare the effects of market volatilities on Mustika Ratu and Kedaung Indah 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 Kedaung Indah. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mustika Ratu and Kedaung Indah.
Diversification Opportunities for Mustika Ratu and Kedaung Indah
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Mustika and Kedaung is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Mustika Ratu Tbk and Kedaung Indah Can in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kedaung Indah Can 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 Kedaung Indah. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kedaung Indah Can has no effect on the direction of Mustika Ratu i.e., Mustika Ratu and Kedaung Indah go up and down completely randomly.
Pair Corralation between Mustika Ratu and Kedaung Indah
Assuming the 90 days trading horizon Mustika Ratu Tbk is expected to generate 1.06 times more return on investment than Kedaung Indah. However, Mustika Ratu is 1.06 times more volatile than Kedaung Indah Can. It trades about -0.28 of its potential returns per unit of risk. Kedaung Indah Can is currently generating about -0.41 per unit of risk. If you would invest 37,400 in Mustika Ratu Tbk on August 28, 2024 and sell it today you would lose (5,200) from holding Mustika Ratu Tbk or give up 13.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mustika Ratu Tbk vs. Kedaung Indah Can
Performance |
| Timeline |
| Mustika Ratu Tbk |
| Kedaung Indah Can |
Mustika Ratu and Kedaung Indah Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mustika Ratu and Kedaung Indah
The main advantage of trading using opposite Mustika Ratu and Kedaung Indah positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mustika Ratu position performs unexpectedly, Kedaung Indah 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 Kedaung Indah will offset losses from the drop in Kedaung Indah's long position.The idea behind Mustika Ratu Tbk and Kedaung Indah Can 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.| Kedaung Indah vs. Langgeng Makmur Industri | Kedaung Indah vs. Kedawung Setia Industrial | Kedaung Indah vs. Mustika Ratu Tbk | Kedaung Indah vs. Kabelindo Murni 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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