Correlation Between Provident Agro and Malindo Feedmill
Can any of the company-specific risk be diversified away by investing in both Provident Agro and Malindo Feedmill 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 Provident Agro and Malindo Feedmill into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Provident Agro Tbk and Malindo Feedmill Tbk, you can compare the effects of market volatilities on Provident Agro and Malindo Feedmill 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 Provident Agro with a short position of Malindo Feedmill. Check out your portfolio center. Please also check ongoing floating volatility patterns of Provident Agro and Malindo Feedmill.
Diversification Opportunities for Provident Agro and Malindo Feedmill
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Provident and Malindo is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Provident Agro Tbk and Malindo Feedmill Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Malindo Feedmill Tbk and Provident Agro 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 Provident Agro Tbk are associated (or correlated) with Malindo Feedmill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Malindo Feedmill Tbk has no effect on the direction of Provident Agro i.e., Provident Agro and Malindo Feedmill go up and down completely randomly.
Pair Corralation between Provident Agro and Malindo Feedmill
Assuming the 90 days trading horizon Provident Agro Tbk is expected to under-perform the Malindo Feedmill. But the stock apears to be less risky and, when comparing its historical volatility, Provident Agro Tbk is 1.6 times less risky than Malindo Feedmill. The stock trades about -0.74 of its potential returns per unit of risk. The Malindo Feedmill Tbk is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest 79,000 in Malindo Feedmill Tbk on November 28, 2024 and sell it today you would lose (6,500) from holding Malindo Feedmill Tbk or give up 8.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
Provident Agro Tbk vs. Malindo Feedmill Tbk
Performance |
| Timeline |
| Provident Agro Tbk |
| Malindo Feedmill Tbk |
Provident Agro and Malindo Feedmill Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Provident Agro and Malindo Feedmill
The main advantage of trading using opposite Provident Agro and Malindo Feedmill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Provident Agro position performs unexpectedly, Malindo Feedmill 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 Malindo Feedmill will offset losses from the drop in Malindo Feedmill's long position.| Provident Agro vs. Dharma Satya Nusantara | Provident Agro vs. Salim Ivomas Pratama | Provident Agro vs. Sawit Sumbermas Sarana | Provident Agro vs. Austindo Nusantara Jaya |
| Malindo Feedmill vs. Japfa Comfeed Indonesia | Malindo Feedmill vs. Charoen Pokphand Indonesia | Malindo Feedmill vs. Surya Semesta Internusa | Malindo Feedmill vs. Mitra Adiperkasa 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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