Correlation Between Era Mandiri and Mahkota Group

Can any of the company-specific risk be diversified away by investing in both Era Mandiri and Mahkota Group 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 Era Mandiri and Mahkota Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Era Mandiri and Mahkota Group

-0.34

Correlation Coefficient

Era Mandiri  Mahkota Group

Very good diversification

The 3 months correlation between Era and Mahkota is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Era Mandiri Cemerlang and Mahkota Group Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mahkota Group Tbk and Era Mandiri 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 Era Mandiri Cemerlang are associated (or correlated) with Mahkota Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mahkota Group Tbk has no effect on the direction of Era Mandiri i.e., Era Mandiri and Mahkota Group go up and down completely randomly.

Pair Corralation between Era Mandiri and Mahkota Group

Assuming the 90 days trading horizon Era Mandiri Cemerlang is expected to generate 4.19 times more return on investment than Mahkota Group. However, Era Mandiri is 4.19 times more volatile than Mahkota Group Tbk. It trades about 0.63 of its potential returns per unit of risk. Mahkota Group Tbk is currently generating about -0.02 per unit of risk. If you would invest  2,400  in Era Mandiri Cemerlang on December 29, 2024 and sell it today you would earn a total of  17,300  from holding Era Mandiri Cemerlang or generate 720.83% return on investment over 90 days.

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

Era Mandiri Cemerlang  vs.  Mahkota Group Tbk

Era Mandiri Cemerlang

Risk-Adjusted Performance

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in Era Mandiri Cemerlang are ranked lower than 49 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Era Mandiri disclosed solid returns over the last few months and may actually be approaching a breakup point.

Mahkota Group Tbk

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Era Mandiri and Mahkota Group

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

The idea behind Era Mandiri Cemerlang and Mahkota Group 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.