Correlation Between Mustika Ratu and Madusari Murni
Can any of the company-specific risk be diversified away by investing in both Mustika Ratu and Madusari Murni 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 Madusari Murni 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 Madusari Murni Indah, you can compare the effects of market volatilities on Mustika Ratu and Madusari Murni 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 Madusari Murni. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mustika Ratu and Madusari Murni.
Diversification Opportunities for Mustika Ratu and Madusari Murni
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Mustika and Madusari is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Mustika Ratu Tbk and Madusari Murni Indah in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madusari Murni Indah 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 Madusari Murni. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madusari Murni Indah has no effect on the direction of Mustika Ratu i.e., Mustika Ratu and Madusari Murni go up and down completely randomly.
Pair Corralation between Mustika Ratu and Madusari Murni
Assuming the 90 days trading horizon Mustika Ratu Tbk is expected to under-perform the Madusari Murni. But the stock apears to be less risky and, when comparing its historical volatility, Mustika Ratu Tbk is 1.22 times less risky than Madusari Murni. The stock trades about -0.04 of its potential returns per unit of risk. The Madusari Murni Indah is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 25,267 in Madusari Murni Indah on August 28, 2024 and sell it today you would lose (3,267) from holding Madusari Murni Indah or give up 12.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.79% |
| Values | Daily Returns |
Mustika Ratu Tbk vs. Madusari Murni Indah
Performance |
| Timeline |
| Mustika Ratu Tbk |
| Madusari Murni Indah |
Mustika Ratu and Madusari Murni Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mustika Ratu and Madusari Murni
The main advantage of trading using opposite Mustika Ratu and Madusari Murni positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mustika Ratu position performs unexpectedly, Madusari Murni 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 Madusari Murni will offset losses from the drop in Madusari Murni's long position.The idea behind Mustika Ratu Tbk and Madusari Murni Indah 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.| Madusari Murni vs. Kedaung Indah Can | Madusari Murni vs. Langgeng Makmur Industri | Madusari Murni vs. Kabelindo Murni Tbk | Madusari Murni 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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