Correlation Between Diamond Food and Merdeka Copper

Can any of the company-specific risk be diversified away by investing in both Diamond Food and Merdeka Copper 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 Diamond Food and Merdeka Copper into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Diamond Food Indonesia and Merdeka Copper Gold, you can compare the effects of market volatilities on Diamond Food and Merdeka Copper 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 Diamond Food with a short position of Merdeka Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Food and Merdeka Copper.

Diversification Opportunities for Diamond Food and Merdeka Copper

0.16

Correlation Coefficient

Diamond Food  Merdeka Copper

Average diversification

The 3 months correlation between Diamond and Merdeka is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Food Indonesia and Merdeka Copper Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merdeka Copper Gold and Diamond Food 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 Diamond Food Indonesia are associated (or correlated) with Merdeka Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merdeka Copper Gold has no effect on the direction of Diamond Food i.e., Diamond Food and Merdeka Copper go up and down completely randomly.

Pair Corralation between Diamond Food and Merdeka Copper

Assuming the 90 days trading horizon Diamond Food Indonesia is expected to under-perform the Merdeka Copper. But the stock apears to be less risky and, when comparing its historical volatility, Diamond Food Indonesia is 9.41 times less risky than Merdeka Copper. The stock trades about -0.14 of its potential returns per unit of risk. The Merdeka Copper Gold is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  157,000  in Merdeka Copper Gold on October 27, 2024 and sell it today you would earn a total of  3,500  from holding Merdeka Copper Gold or generate 2.23% return on investment over 90 days.

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

Diamond Food Indonesia  vs.  Merdeka Copper Gold

Diamond Food Indonesia

Risk-Adjusted Performance

0 of 100

Very Weak

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

Merdeka Copper Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Merdeka Copper Gold 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 February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Diamond Food and Merdeka Copper

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

The idea behind Diamond Food Indonesia and Merdeka Copper Gold 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.