Correlation Between Metro Healthcare and Kioson Komersial

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

Diversification Opportunities for Metro Healthcare and Kioson Komersial

-0.59

Correlation Coefficient

Metro Healthcare  Kioson Komersial

Excellent diversification

The 3 months correlation between Metro and Kioson is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Metro Healthcare Indonesia and Kioson Komersial Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kioson Komersial Ind 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 Kioson Komersial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kioson Komersial Ind has no effect on the direction of Metro Healthcare i.e., Metro Healthcare and Kioson Komersial go up and down completely randomly.

Pair Corralation between Metro Healthcare and Kioson Komersial

Assuming the 90 days trading horizon Metro Healthcare Indonesia is expected to generate 1.65 times more return on investment than Kioson Komersial. However, Metro Healthcare is 1.65 times more volatile than Kioson Komersial Indonesia. It trades about -0.02 of its potential returns per unit of risk. Kioson Komersial Indonesia is currently generating about -0.05 per unit of risk. If you would invest  47,400  in Metro Healthcare Indonesia on October 11, 2024 and sell it today you would lose (27,200) from holding Metro Healthcare Indonesia or give up 57.38% of portfolio value over 90 days.

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

Metro Healthcare Indonesia  vs.  Kioson Komersial 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.

Kioson Komersial Ind

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kioson Komersial Indonesia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Kioson Komersial is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Metro Healthcare and Kioson Komersial

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

The idea behind Metro Healthcare Indonesia and Kioson Komersial 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.

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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.