Correlation Between Metro Healthcare and Sarana Meditama

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

Diversification Opportunities for Metro Healthcare and Sarana Meditama

-0.57

Correlation Coefficient

Metro Healthcare  Sarana Meditama

Excellent diversification

The 3 months correlation between Metro and Sarana is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Metro Healthcare Indonesia and Sarana Meditama Metropolitan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sarana Meditama Metr 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 Sarana Meditama. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sarana Meditama Metr has no effect on the direction of Metro Healthcare i.e., Metro Healthcare and Sarana Meditama go up and down completely randomly.

Pair Corralation between Metro Healthcare and Sarana Meditama

Assuming the 90 days trading horizon Metro Healthcare Indonesia is expected to generate 1.45 times more return on investment than Sarana Meditama. However, Metro Healthcare is 1.45 times more volatile than Sarana Meditama Metropolitan. It trades about 0.41 of its potential returns per unit of risk. Sarana Meditama Metropolitan is currently generating about -0.32 per unit of risk. If you would invest  13,100  in Metro Healthcare Indonesia on September 1, 2024 and sell it today you would earn a total of  4,000  from holding Metro Healthcare Indonesia or generate 30.53% return on investment over 90 days.

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

Metro Healthcare Indonesia  vs.  Sarana Meditama Metropolitan

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.

Sarana Meditama Metr

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sarana Meditama Metropolitan has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Metro Healthcare and Sarana Meditama

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

The idea behind Metro Healthcare Indonesia and Sarana Meditama Metropolitan 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.