Correlation Between Energi Mega and Medco Energi

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

By analyzing existing cross correlation between Energi Mega Persada and Medco Energi Internasional, you can compare the effects of market volatilities on Energi Mega and Medco Energi 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 Energi Mega with a short position of Medco Energi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energi Mega and Medco Energi.

Diversification Opportunities for Energi Mega and Medco Energi

0.72

Correlation Coefficient

Energi Mega  Medco Energi

Poor diversification

The 3 months correlation between Energi and Medco is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Energi Mega Persada and Medco Energi Internasional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medco Energi Interna and Energi Mega 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 Energi Mega Persada are associated (or correlated) with Medco Energi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medco Energi Interna has no effect on the direction of Energi Mega i.e., Energi Mega and Medco Energi go up and down completely randomly.

Pair Corralation between Energi Mega and Medco Energi

Assuming the 90 days trading horizon Energi Mega Persada is expected to under-perform the Medco Energi. In addition to that, Energi Mega is 1.14 times more volatile than Medco Energi Internasional. It trades about -0.13 of its total potential returns per unit of risk. Medco Energi Internasional is currently generating about -0.03 per unit of volatility. If you would invest  109,000  in Medco Energi Internasional on November 29, 2024 and sell it today you would lose (6,000) from holding Medco Energi Internasional or give up 5.5% of portfolio value over 90 days.

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

Energi Mega Persada  vs.  Medco Energi Internasional

Energi Mega Persada

Risk-Adjusted Performance

Very Weak

Over the last 90 days Energi Mega Persada 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 March 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Medco Energi Interna

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Energi Mega and Medco Energi

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

The idea behind Energi Mega Persada and Medco Energi Internasional 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.