Correlation Between Metro Healthcare and Era Media

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

Diversification Opportunities for Metro Healthcare and Era Media

0.44

Correlation Coefficient

Metro Healthcare  Era Media

Very weak diversification

The 3 months correlation between Metro and Era is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Metro Healthcare Indonesia and Era Media Sejahtera in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Era Media Sejahtera 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 Era Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Era Media Sejahtera has no effect on the direction of Metro Healthcare i.e., Metro Healthcare and Era Media go up and down completely randomly.

Pair Corralation between Metro Healthcare and Era Media

Assuming the 90 days trading horizon Metro Healthcare is expected to generate 5.07 times less return on investment than Era Media. But when comparing it to its historical volatility, Metro Healthcare Indonesia is 2.63 times less risky than Era Media. It trades about 0.08 of its potential returns per unit of risk. Era Media Sejahtera is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  5,400  in Era Media Sejahtera on December 21, 2024 and sell it today you would earn a total of  4,200  from holding Era Media Sejahtera or generate 77.78% return on investment over 90 days.

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

Metro Healthcare Indonesia  vs.  Era Media Sejahtera

Metro Healthcare Ind

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Metro Healthcare Indonesia are ranked lower than 6 (%) 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.

Era Media Sejahtera

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Era Media Sejahtera are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Era Media disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Metro Healthcare and Era Media

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

The idea behind Metro Healthcare Indonesia and Era Media Sejahtera 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 Transaction History module to view history of all your transactions and understand their impact on performance.