Correlation Between Metro Healthcare and Hoffmen Cleanindo

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

Diversification Opportunities for Metro Healthcare and Hoffmen Cleanindo

-0.73

Correlation Coefficient

Metro Healthcare  Hoffmen Cleanindo

Pay attention - limited upside

The 3 months correlation between Metro and Hoffmen is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Metro Healthcare Indonesia and Hoffmen Cleanindo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hoffmen Cleanindo 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 Hoffmen Cleanindo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hoffmen Cleanindo has no effect on the direction of Metro Healthcare i.e., Metro Healthcare and Hoffmen Cleanindo go up and down completely randomly.

Pair Corralation between Metro Healthcare and Hoffmen Cleanindo

Assuming the 90 days trading horizon Metro Healthcare is expected to generate 8.09 times less return on investment than Hoffmen Cleanindo. In addition to that, Metro Healthcare is 1.39 times more volatile than Hoffmen Cleanindo. It trades about 0.01 of its total potential returns per unit of risk. Hoffmen Cleanindo is currently generating about 0.06 per unit of volatility. If you would invest  12,300  in Hoffmen Cleanindo on October 11, 2024 and sell it today you would earn a total of  5,700  from holding Hoffmen Cleanindo or generate 46.34% 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.  Hoffmen Cleanindo

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.

Hoffmen Cleanindo

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hoffmen Cleanindo are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Hoffmen Cleanindo may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Metro Healthcare and Hoffmen Cleanindo

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

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