Correlation Between Enseval Putra and Matahari Department

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

By analyzing existing cross correlation between Enseval Putra Megatrading and Matahari Department Store, you can compare the effects of market volatilities on Enseval Putra and Matahari Department 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 Enseval Putra with a short position of Matahari Department. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enseval Putra and Matahari Department.

Diversification Opportunities for Enseval Putra and Matahari Department

0.67

Correlation Coefficient

Enseval Putra  Matahari Department

Poor diversification

The 3 months correlation between Enseval and Matahari is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Enseval Putra Megatrading and Matahari Department Store in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matahari Department Store and Enseval Putra 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 Enseval Putra Megatrading are associated (or correlated) with Matahari Department. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matahari Department Store has no effect on the direction of Enseval Putra i.e., Enseval Putra and Matahari Department go up and down completely randomly.

Pair Corralation between Enseval Putra and Matahari Department

Assuming the 90 days trading horizon Enseval Putra Megatrading is expected to generate 0.36 times more return on investment than Matahari Department. However, Enseval Putra Megatrading is 2.75 times less risky than Matahari Department. It trades about -0.1 of its potential returns per unit of risk. Matahari Department Store is currently generating about -0.16 per unit of risk. If you would invest  249,000  in Enseval Putra Megatrading on September 2, 2024 and sell it today you would lose (10,000) from holding Enseval Putra Megatrading or give up 4.02% of portfolio value over 90 days.

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

Enseval Putra Megatrading  vs.  Matahari Department Store

Enseval Putra Megatrading

Risk-Adjusted Performance

0 of 100

Very Weak

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

Matahari Department Store

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Matahari Department Store 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 January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Enseval Putra and Matahari Department

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

The idea behind Enseval Putra Megatrading and Matahari Department Store 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.