Correlation Between Natura City and MD Pictures

Can any of the company-specific risk be diversified away by investing in both Natura City and MD Pictures 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 Natura City and MD Pictures into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Natura City Developments and MD Pictures Tbk, you can compare the effects of market volatilities on Natura City and MD Pictures 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 Natura City with a short position of MD Pictures. Check out your portfolio center. Please also check ongoing floating volatility patterns of Natura City and MD Pictures.

Diversification Opportunities for Natura City and MD Pictures

-0.52

Correlation Coefficient

Natura City  MD Pictures

Excellent diversification

The 3 months correlation between Natura and FILM is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Natura City Developments and MD Pictures Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MD Pictures Tbk and Natura City 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 Natura City Developments are associated (or correlated) with MD Pictures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MD Pictures Tbk has no effect on the direction of Natura City i.e., Natura City and MD Pictures go up and down completely randomly.

Pair Corralation between Natura City and MD Pictures

Assuming the 90 days trading horizon Natura City Developments is expected to under-perform the MD Pictures. But the stock apears to be less risky and, when comparing its historical volatility, Natura City Developments is 1.81 times less risky than MD Pictures. The stock trades about -0.2 of its potential returns per unit of risk. The MD Pictures Tbk is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  398,000  in MD Pictures Tbk on December 2, 2024 and sell it today you would lose (32,000) from holding MD Pictures Tbk or give up 8.04% of portfolio value over 90 days.

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

Natura City Developments  vs.  MD Pictures Tbk

Natura City Developments

Risk-Adjusted Performance

Very Weak

Over the last 90 days Natura City Developments 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 April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

MD Pictures Tbk

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MD Pictures Tbk are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, MD Pictures disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Natura City and MD Pictures

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

The idea behind Natura City Developments and MD Pictures Tbk 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..