Correlation Between Indo Borax and MAS Financial

Can any of the company-specific risk be diversified away by investing in both Indo Borax and MAS Financial 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 Indo Borax and MAS Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Indo Borax Chemicals and MAS Financial Services, you can compare the effects of market volatilities on Indo Borax and MAS Financial 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 Indo Borax with a short position of MAS Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indo Borax and MAS Financial.

Diversification Opportunities for Indo Borax and MAS Financial

0.64

Correlation Coefficient

Indo Borax  MAS Financial

Poor diversification

The 3 months correlation between Indo and MAS is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Indo Borax Chemicals and MAS Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MAS Financial Services and Indo Borax 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 Indo Borax Chemicals are associated (or correlated) with MAS Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MAS Financial Services has no effect on the direction of Indo Borax i.e., Indo Borax and MAS Financial go up and down completely randomly.

Pair Corralation between Indo Borax and MAS Financial

Assuming the 90 days trading horizon Indo Borax Chemicals is expected to generate 1.89 times more return on investment than MAS Financial. However, Indo Borax is 1.89 times more volatile than MAS Financial Services. It trades about -0.06 of its potential returns per unit of risk. MAS Financial Services is currently generating about -0.29 per unit of risk. If you would invest  18,897  in Indo Borax Chemicals on October 22, 2024 and sell it today you would lose (851.00) from holding Indo Borax Chemicals or give up 4.5% of portfolio value over 90 days.

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

Indo Borax Chemicals  vs.  MAS Financial Services

Indo Borax Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indo Borax Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Indo Borax is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

MAS Financial Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MAS Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Indo Borax and MAS Financial

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

The idea behind Indo Borax Chemicals and MAS Financial Services 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.