Correlation Between Metro Healthcare and Hensel Davest

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

Diversification Opportunities for Metro Healthcare and Hensel Davest

-0.09

Correlation Coefficient

Metro Healthcare  Hensel Davest

Good diversification

The 3 months correlation between Metro and Hensel is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Metro Healthcare Indonesia and Hensel Davest Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hensel Davest Indonesia 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 Hensel Davest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hensel Davest Indonesia has no effect on the direction of Metro Healthcare i.e., Metro Healthcare and Hensel Davest go up and down completely randomly.

Pair Corralation between Metro Healthcare and Hensel Davest

Assuming the 90 days trading horizon Metro Healthcare Indonesia is expected to under-perform the Hensel Davest. But the stock apears to be less risky and, when comparing its historical volatility, Metro Healthcare Indonesia is 10.82 times less risky than Hensel Davest. The stock trades about -0.02 of its potential returns per unit of risk. The Hensel Davest Indonesia is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  5,300  in Hensel Davest Indonesia on October 11, 2024 and sell it today you would lose (2,400) from holding Hensel Davest Indonesia or give up 45.28% of portfolio value over 90 days.

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

Metro Healthcare Indonesia  vs.  Hensel Davest Indonesia

Metro Healthcare Ind

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Metro Healthcare Indonesia are ranked lower than 26 (%) 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.

Hensel Davest Indonesia

Risk-Adjusted Performance

16 of 100

Good

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

Pair Trading with Metro Healthcare and Hensel Davest

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

The idea behind Metro Healthcare Indonesia and Hensel Davest Indonesia 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.