Correlation Between Metro Healthcare and Pacific Strategic

Can any of the company-specific risk be diversified away by investing in both Metro Healthcare and Pacific Strategic 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 Metro Healthcare and Pacific Strategic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Metro Healthcare Indonesia and Pacific Strategic Financial, you can compare the effects of market volatilities on Metro Healthcare and Pacific Strategic 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 Metro Healthcare with a short position of Pacific Strategic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metro Healthcare and Pacific Strategic.

Diversification Opportunities for Metro Healthcare and Pacific Strategic

-0.31

Correlation Coefficient

Metro Healthcare  Pacific Strategic

Very good diversification

The 3 months correlation between Metro and Pacific is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Metro Healthcare Indonesia and Pacific Strategic Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Strategic and Metro Healthcare 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 Metro Healthcare Indonesia are associated (or correlated) with Pacific Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Strategic has no effect on the direction of Metro Healthcare i.e., Metro Healthcare and Pacific Strategic go up and down completely randomly.

Pair Corralation between Metro Healthcare and Pacific Strategic

Assuming the 90 days trading horizon Metro Healthcare Indonesia is expected to generate 2.29 times more return on investment than Pacific Strategic. However, Metro Healthcare is 2.29 times more volatile than Pacific Strategic Financial. It trades about 0.35 of its potential returns per unit of risk. Pacific Strategic Financial is currently generating about -0.05 per unit of risk. If you would invest  8,400  in Metro Healthcare Indonesia on September 2, 2024 and sell it today you would earn a total of  8,700  from holding Metro Healthcare Indonesia or generate 103.57% return on investment over 90 days.

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

Metro Healthcare Indonesia  vs.  Pacific Strategic Financial

Metro Healthcare Ind

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Metro Healthcare Indonesia are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Metro Healthcare disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pacific Strategic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pacific Strategic Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Pacific Strategic 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 Metro Healthcare and Pacific Strategic

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

The idea behind Metro Healthcare Indonesia and Pacific Strategic Financial 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.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..