Correlation Between Metro Healthcare and Bhakti Multi

Can any of the company-specific risk be diversified away by investing in both Metro Healthcare and Bhakti Multi 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 Bhakti Multi 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 Bhakti Multi Artha, you can compare the effects of market volatilities on Metro Healthcare and Bhakti Multi 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 Bhakti Multi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metro Healthcare and Bhakti Multi.

Diversification Opportunities for Metro Healthcare and Bhakti Multi

-0.7

Correlation Coefficient

Metro Healthcare  Bhakti Multi

Excellent diversification

The 3 months correlation between Metro and Bhakti is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Metro Healthcare Indonesia and Bhakti Multi Artha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bhakti Multi Artha 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 Bhakti Multi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bhakti Multi Artha has no effect on the direction of Metro Healthcare i.e., Metro Healthcare and Bhakti Multi go up and down completely randomly.

Pair Corralation between Metro Healthcare and Bhakti Multi

Assuming the 90 days trading horizon Metro Healthcare Indonesia is expected to generate 2.07 times more return on investment than Bhakti Multi. However, Metro Healthcare is 2.07 times more volatile than Bhakti Multi Artha. It trades about 0.33 of its potential returns per unit of risk. Bhakti Multi Artha is currently generating about -0.15 per unit of risk. If you would invest  9,400  in Metro Healthcare Indonesia on September 3, 2024 and sell it today you would earn a total of  7,700  from holding Metro Healthcare Indonesia or generate 81.91% return on investment over 90 days.

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

Metro Healthcare Indonesia  vs.  Bhakti Multi Artha

Metro Healthcare Ind

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Metro Healthcare Indonesia are ranked lower than 25 (%) 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.

Bhakti Multi Artha

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bhakti Multi Artha has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Metro Healthcare and Bhakti Multi

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

The idea behind Metro Healthcare Indonesia and Bhakti Multi Artha 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.