Correlation Between Metro Healthcare and Cipta Selera

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

Diversification Opportunities for Metro Healthcare and Cipta Selera

0.89

Correlation Coefficient

Metro Healthcare  Cipta Selera

Very poor diversification

The 3 months correlation between Metro and Cipta is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Metro Healthcare Indonesia and Cipta Selera Murni in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cipta Selera Murni 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 Cipta Selera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cipta Selera Murni has no effect on the direction of Metro Healthcare i.e., Metro Healthcare and Cipta Selera go up and down completely randomly.

Pair Corralation between Metro Healthcare and Cipta Selera

Assuming the 90 days trading horizon Metro Healthcare Indonesia is expected to under-perform the Cipta Selera. In addition to that, Metro Healthcare is 3.08 times more volatile than Cipta Selera Murni. It trades about -0.02 of its total potential returns per unit of risk. Cipta Selera Murni is currently generating about 0.01 per unit of volatility. If you would invest  315,000  in Cipta Selera Murni on October 11, 2024 and sell it today you would earn a total of  9,000  from holding Cipta Selera Murni or generate 2.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.79%
Values	Daily Returns

Metro Healthcare Indonesia  vs.  Cipta Selera Murni

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.

Cipta Selera Murni

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cipta Selera Murni are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Cipta Selera disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Metro Healthcare and Cipta Selera

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

The idea behind Metro Healthcare Indonesia and Cipta Selera Murni 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 Commodity Directory module to find actively traded commodities issued by global exchanges.