Correlation Between Ultra Jaya and Merck Tbk
Can any of the company-specific risk be diversified away by investing in both Ultra Jaya and Merck Tbk 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 Ultra Jaya and Merck Tbk into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ultra Jaya Milk and Merck Tbk, you can compare the effects of market volatilities on Ultra Jaya and Merck Tbk 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 Ultra Jaya with a short position of Merck Tbk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultra Jaya and Merck Tbk.
Diversification Opportunities for Ultra Jaya and Merck Tbk
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ultra and Merck is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Jaya Milk and Merck Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Tbk and Ultra Jaya 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 Ultra Jaya Milk are associated (or correlated) with Merck Tbk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merck Tbk has no effect on the direction of Ultra Jaya i.e., Ultra Jaya and Merck Tbk go up and down completely randomly.
Pair Corralation between Ultra Jaya and Merck Tbk
Assuming the 90 days trading horizon Ultra Jaya Milk is expected to generate 2.2 times more return on investment than Merck Tbk. However, Ultra Jaya is 2.2 times more volatile than Merck Tbk. It trades about 0.04 of its potential returns per unit of risk. Merck Tbk is currently generating about -0.1 per unit of risk. If you would invest 166,314 in Ultra Jaya Milk on September 2, 2024 and sell it today you would earn a total of 12,686 from holding Ultra Jaya Milk or generate 7.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ultra Jaya Milk vs. Merck Tbk
Performance |
| Timeline |
| Ultra Jaya Milk |
| Merck Tbk |
Ultra Jaya and Merck Tbk Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ultra Jaya and Merck Tbk
The main advantage of trading using opposite Ultra Jaya and Merck Tbk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ultra Jaya position performs unexpectedly, Merck Tbk 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 Merck Tbk will offset losses from the drop in Merck Tbk's long position.| Ultra Jaya vs. Bank BRISyariah Tbk | Ultra Jaya vs. Mitra Pinasthika Mustika | Ultra Jaya vs. Jakarta Int Hotels | Ultra Jaya vs. Indosterling Technomedia Tbk |
| Merck Tbk vs. Matahari Department Store | Merck Tbk vs. Surya Citra Media | Merck Tbk vs. Lippo Karawaci 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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