Correlation Between Fortune Indonesia and Digital Mediatama

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

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

Diversification Opportunities for Fortune Indonesia and Digital Mediatama

0.75

Correlation Coefficient

Fortune Indonesia  Digital Mediatama

Poor diversification

The 3 months correlation between Fortune and Digital is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Fortune Indonesia Tbk and Digital Mediatama Maxima in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital Mediatama Maxima and Fortune Indonesia 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 Fortune Indonesia Tbk are associated (or correlated) with Digital Mediatama. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digital Mediatama Maxima has no effect on the direction of Fortune Indonesia i.e., Fortune Indonesia and Digital Mediatama go up and down completely randomly.

Pair Corralation between Fortune Indonesia and Digital Mediatama

Assuming the 90 days trading horizon Fortune Indonesia Tbk is expected to generate 1.79 times more return on investment than Digital Mediatama. However, Fortune Indonesia is 1.79 times more volatile than Digital Mediatama Maxima. It trades about 0.14 of its potential returns per unit of risk. Digital Mediatama Maxima is currently generating about 0.19 per unit of risk. If you would invest  257,000  in Fortune Indonesia Tbk on September 1, 2024 and sell it today you would earn a total of  208,000  from holding Fortune Indonesia Tbk or generate 80.93% return on investment over 90 days.

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

Fortune Indonesia Tbk  vs.  Digital Mediatama Maxima

Fortune Indonesia Tbk

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fortune Indonesia Tbk are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Fortune Indonesia disclosed solid returns over the last few months and may actually be approaching a breakup point.

Digital Mediatama Maxima

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Digital Mediatama Maxima are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Digital Mediatama disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fortune Indonesia and Digital Mediatama

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

The idea behind Fortune Indonesia Tbk and Digital Mediatama Maxima 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.