Correlation Between Diamond Food and Multi Makmur

Can any of the company-specific risk be diversified away by investing in both Diamond Food and Multi Makmur 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 Multi Makmur 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 Multi Makmur Lemindo, you can compare the effects of market volatilities on Diamond Food and Multi Makmur 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 Multi Makmur. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Food and Multi Makmur.

Diversification Opportunities for Diamond Food and Multi Makmur

-0.3

Correlation Coefficient

Diamond Food  Multi Makmur

Very good diversification

The 3 months correlation between Diamond and Multi is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Food Indonesia and Multi Makmur Lemindo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi Makmur Lemindo 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 Multi Makmur. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multi Makmur Lemindo has no effect on the direction of Diamond Food i.e., Diamond Food and Multi Makmur go up and down completely randomly.

Pair Corralation between Diamond Food and Multi Makmur

Assuming the 90 days trading horizon Diamond Food Indonesia is expected to under-perform the Multi Makmur. But the stock apears to be less risky and, when comparing its historical volatility, Diamond Food Indonesia is 4.0 times less risky than Multi Makmur. The stock trades about -0.01 of its potential returns per unit of risk. The Multi Makmur Lemindo is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,100  in Multi Makmur Lemindo on December 30, 2024 and sell it today you would earn a total of  900.00  from holding Multi Makmur Lemindo or generate 81.82% return on investment over 90 days.

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

Diamond Food Indonesia  vs.  Multi Makmur Lemindo

Diamond Food Indonesia

Risk-Adjusted Performance

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.

Multi Makmur Lemindo

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Multi Makmur Lemindo are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Multi Makmur disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Diamond Food and Multi Makmur

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

The idea behind Diamond Food Indonesia and Multi Makmur Lemindo 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.