Correlation Between Maming Enam and Cikarang Listrindo

Can any of the company-specific risk be diversified away by investing in both Maming Enam and Cikarang Listrindo 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 Maming Enam and Cikarang Listrindo into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Maming Enam Sembilan and Cikarang Listrindo Tbk, you can compare the effects of market volatilities on Maming Enam and Cikarang Listrindo 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 Maming Enam with a short position of Cikarang Listrindo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Maming Enam and Cikarang Listrindo.

Diversification Opportunities for Maming Enam and Cikarang Listrindo

0.79

Correlation Coefficient

Maming Enam  Cikarang Listrindo

Poor diversification

The 3 months correlation between Maming and Cikarang is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Maming Enam Sembilan and Cikarang Listrindo Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cikarang Listrindo Tbk and Maming Enam 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 Maming Enam Sembilan are associated (or correlated) with Cikarang Listrindo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cikarang Listrindo Tbk has no effect on the direction of Maming Enam i.e., Maming Enam and Cikarang Listrindo go up and down completely randomly.

Pair Corralation between Maming Enam and Cikarang Listrindo

Assuming the 90 days trading horizon Maming Enam Sembilan is expected to generate 12.13 times more return on investment than Cikarang Listrindo. However, Maming Enam is 12.13 times more volatile than Cikarang Listrindo Tbk. It trades about 0.2 of its potential returns per unit of risk. Cikarang Listrindo Tbk is currently generating about 0.09 per unit of risk. If you would invest  13,500  in Maming Enam Sembilan on September 2, 2024 and sell it today you would earn a total of  25,300  from holding Maming Enam Sembilan or generate 187.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Maming Enam Sembilan  vs.  Cikarang Listrindo Tbk

Maming Enam Sembilan

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Maming Enam Sembilan are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Maming Enam disclosed solid returns over the last few months and may actually be approaching a breakup point.

Cikarang Listrindo Tbk

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cikarang Listrindo Tbk are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Cikarang Listrindo is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Maming Enam and Cikarang Listrindo

The main advantage of trading using opposite Maming Enam and Cikarang Listrindo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Maming Enam position performs unexpectedly, Cikarang Listrindo 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 Cikarang Listrindo will offset losses from the drop in Cikarang Listrindo's long position.

The idea behind Maming Enam Sembilan and Cikarang Listrindo Tbk 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.

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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.