Correlation Between MD Pictures and Natura City

Can any of the company-specific risk be diversified away by investing in both MD Pictures and Natura City 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 Natura City 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 Natura City Developments, you can compare the effects of market volatilities on MD Pictures and Natura City 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 Natura City. Check out your portfolio center. Please also check ongoing floating volatility patterns of MD Pictures and Natura City.

Diversification Opportunities for MD Pictures and Natura City

-0.15

Correlation Coefficient

MD Pictures  Natura City

Good diversification

The 3 months correlation between FILM and Natura is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding MD Pictures Tbk and Natura City Developments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natura City Developments 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 Natura City. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natura City Developments has no effect on the direction of MD Pictures i.e., MD Pictures and Natura City go up and down completely randomly.

Pair Corralation between MD Pictures and Natura City

Assuming the 90 days trading horizon MD Pictures Tbk is expected to under-perform the Natura City. But the stock apears to be less risky and, when comparing its historical volatility, MD Pictures Tbk is 2.49 times less risky than Natura City. The stock trades about -0.02 of its potential returns per unit of risk. The Natura City Developments is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  8,000  in Natura City Developments on September 13, 2024 and sell it today you would earn a total of  4,900  from holding Natura City Developments or generate 61.25% return on investment over 90 days.

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

MD Pictures Tbk  vs.  Natura City Developments

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.

Natura City Developments

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Natura City Developments are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Natura City disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MD Pictures and Natura City

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

The idea behind MD Pictures Tbk and Natura City Developments 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.