Correlation Between Erajaya Swasembada and Multipolar Tbk

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

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

Diversification Opportunities for Erajaya Swasembada and Multipolar Tbk

-0.13

Correlation Coefficient

Erajaya Swasembada  Multipolar Tbk

Good diversification

The 3 months correlation between Erajaya and Multipolar is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Erajaya Swasembada Tbk and Multipolar Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multipolar Tbk and Erajaya Swasembada 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 Erajaya Swasembada Tbk are associated (or correlated) with Multipolar Tbk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multipolar Tbk has no effect on the direction of Erajaya Swasembada i.e., Erajaya Swasembada and Multipolar Tbk go up and down completely randomly.

Pair Corralation between Erajaya Swasembada and Multipolar Tbk

Assuming the 90 days trading horizon Erajaya Swasembada Tbk is expected to under-perform the Multipolar Tbk. But the stock apears to be less risky and, when comparing its historical volatility, Erajaya Swasembada Tbk is 3.82 times less risky than Multipolar Tbk. The stock trades about -0.03 of its potential returns per unit of risk. The Multipolar Tbk is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  7,200  in Multipolar Tbk on September 4, 2024 and sell it today you would earn a total of  3,500  from holding Multipolar Tbk or generate 48.61% return on investment over 90 days.

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

Erajaya Swasembada Tbk  vs.  Multipolar Tbk

Erajaya Swasembada Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

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

Multipolar Tbk

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Multipolar Tbk are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward-looking signals, Multipolar Tbk disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Erajaya Swasembada and Multipolar Tbk

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

The idea behind Erajaya Swasembada Tbk and Multipolar 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 Global Correlations module to find global opportunities by holding instruments from different markets.