Correlation Between Itama Ranoraya and Metro Healthcare

Can any of the company-specific risk be diversified away by investing in both Itama Ranoraya and Metro Healthcare 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 Itama Ranoraya and Metro Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Itama Ranoraya and Metro Healthcare Indonesia, you can compare the effects of market volatilities on Itama Ranoraya and Metro Healthcare 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 Itama Ranoraya with a short position of Metro Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Itama Ranoraya and Metro Healthcare.

Diversification Opportunities for Itama Ranoraya and Metro Healthcare

-0.87

Correlation Coefficient

Itama Ranoraya  Metro Healthcare

Pay attention - limited upside

The 3 months correlation between Itama and Metro is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Itama Ranoraya and Metro Healthcare Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro Healthcare Ind and Itama Ranoraya 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 Itama Ranoraya are associated (or correlated) with Metro Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro Healthcare Ind has no effect on the direction of Itama Ranoraya i.e., Itama Ranoraya and Metro Healthcare go up and down completely randomly.

Pair Corralation between Itama Ranoraya and Metro Healthcare

Assuming the 90 days trading horizon Itama Ranoraya is expected to under-perform the Metro Healthcare. But the stock apears to be less risky and, when comparing its historical volatility, Itama Ranoraya is 3.19 times less risky than Metro Healthcare. The stock trades about -0.23 of its potential returns per unit of risk. The Metro Healthcare Indonesia is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  9,400  in Metro Healthcare Indonesia on September 3, 2024 and sell it today you would earn a total of  7,700  from holding Metro Healthcare Indonesia or generate 81.91% return on investment over 90 days.

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

Itama Ranoraya  vs.  Metro Healthcare Indonesia

Itama Ranoraya

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Itama Ranoraya 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.

Metro Healthcare Ind

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Metro Healthcare Indonesia are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Metro Healthcare disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Itama Ranoraya and Metro Healthcare

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

The idea behind Itama Ranoraya and Metro Healthcare Indonesia 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.