Correlation Between Electronic City and Hero Supermarket

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

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

Diversification Opportunities for Electronic City and Hero Supermarket

-0.5

Correlation Coefficient

Electronic City  Hero Supermarket

Very good diversification

The 3 months correlation between Electronic and Hero is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Electronic City Indonesia and Hero Supermarket Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hero Supermarket Tbk and Electronic 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 Electronic City Indonesia are associated (or correlated) with Hero Supermarket. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hero Supermarket Tbk has no effect on the direction of Electronic City i.e., Electronic City and Hero Supermarket go up and down completely randomly.

Pair Corralation between Electronic City and Hero Supermarket

Assuming the 90 days trading horizon Electronic City Indonesia is expected to generate 1.83 times more return on investment than Hero Supermarket. However, Electronic City is 1.83 times more volatile than Hero Supermarket Tbk. It trades about -0.01 of its potential returns per unit of risk. Hero Supermarket Tbk is currently generating about -0.08 per unit of risk. If you would invest  48,792  in Electronic City Indonesia on October 7, 2024 and sell it today you would lose (24,992) from holding Electronic City Indonesia or give up 51.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Electronic City Indonesia  vs.  Hero Supermarket Tbk

Electronic City Indonesia

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Electronic City Indonesia are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Electronic City disclosed solid returns over the last few months and may actually be approaching a breakup point.

Hero Supermarket Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hero Supermarket 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 Electronic City and Hero Supermarket

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

The idea behind Electronic City Indonesia and Hero Supermarket 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.