Correlation Between MD Pictures and Bintang Oto

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

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

Diversification Opportunities for MD Pictures and Bintang Oto

0.35

Correlation Coefficient

MD Pictures  Bintang Oto

Weak diversification

The 3 months correlation between FILM and Bintang is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding MD Pictures Tbk and Bintang Oto Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bintang Oto Global and MD Pictures 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 MD Pictures Tbk are associated (or correlated) with Bintang Oto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bintang Oto Global has no effect on the direction of MD Pictures i.e., MD Pictures and Bintang Oto go up and down completely randomly.

Pair Corralation between MD Pictures and Bintang Oto

Assuming the 90 days trading horizon MD Pictures Tbk is expected to generate 1.13 times more return on investment than Bintang Oto. However, MD Pictures is 1.13 times more volatile than Bintang Oto Global. It trades about -0.01 of its potential returns per unit of risk. Bintang Oto Global is currently generating about -0.24 per unit of risk. If you would invest  404,000  in MD Pictures Tbk on September 14, 2024 and sell it today you would lose (29,000) from holding MD Pictures Tbk or give up 7.18% of portfolio value over 90 days.

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

MD Pictures Tbk  vs.  Bintang Oto Global

MD Pictures Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

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

Bintang Oto Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bintang Oto Global 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 MD Pictures and Bintang Oto

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

The idea behind MD Pictures Tbk and Bintang Oto Global 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.