Correlation Between Digital Mediatama and First Media

Can any of the company-specific risk be diversified away by investing in both Digital Mediatama and First Media 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 Digital Mediatama and First Media into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Digital Mediatama Maxima and First Media Tbk, you can compare the effects of market volatilities on Digital Mediatama and First Media 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 Digital Mediatama with a short position of First Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digital Mediatama and First Media.

Diversification Opportunities for Digital Mediatama and First Media

-0.39

Correlation Coefficient

Digital Mediatama  First Media

Very good diversification

The 3 months correlation between Digital and First is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Digital Mediatama Maxima and First Media Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Media Tbk and Digital Mediatama 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 Digital Mediatama Maxima are associated (or correlated) with First Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Media Tbk has no effect on the direction of Digital Mediatama i.e., Digital Mediatama and First Media go up and down completely randomly.

Pair Corralation between Digital Mediatama and First Media

Assuming the 90 days trading horizon Digital Mediatama Maxima is expected to generate 6.19 times more return on investment than First Media. However, Digital Mediatama is 6.19 times more volatile than First Media Tbk. It trades about 0.24 of its potential returns per unit of risk. First Media Tbk is currently generating about 0.1 per unit of risk. If you would invest  22,800  in Digital Mediatama Maxima on December 1, 2024 and sell it today you would earn a total of  8,200  from holding Digital Mediatama Maxima or generate 35.96% return on investment over 90 days.

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

Digital Mediatama Maxima  vs.  First Media Tbk

Digital Mediatama Maxima

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Digital Mediatama Maxima are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Digital Mediatama disclosed solid returns over the last few months and may actually be approaching a breakup point.

First Media Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Media Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Digital Mediatama and First Media

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

The idea behind Digital Mediatama Maxima and First Media 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.

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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.