Correlation Between Sumber Energi and Megapower Makmur

Can any of the company-specific risk be diversified away by investing in both Sumber Energi and Megapower Makmur 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 Sumber Energi and Megapower Makmur into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sumber Energi Andalan and Megapower Makmur TBK, you can compare the effects of market volatilities on Sumber Energi and Megapower Makmur 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 Sumber Energi with a short position of Megapower Makmur. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumber Energi and Megapower Makmur.

Diversification Opportunities for Sumber Energi and Megapower Makmur

0.22

Correlation Coefficient

Sumber Energi  Megapower Makmur

Modest diversification

The 3 months correlation between Sumber and Megapower is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Sumber Energi Andalan and Megapower Makmur TBK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Megapower Makmur TBK and Sumber Energi 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 Sumber Energi Andalan are associated (or correlated) with Megapower Makmur. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Megapower Makmur TBK has no effect on the direction of Sumber Energi i.e., Sumber Energi and Megapower Makmur go up and down completely randomly.

Pair Corralation between Sumber Energi and Megapower Makmur

Assuming the 90 days trading horizon Sumber Energi is expected to generate 2.38 times less return on investment than Megapower Makmur. But when comparing it to its historical volatility, Sumber Energi Andalan is 1.64 times less risky than Megapower Makmur. It trades about 0.08 of its potential returns per unit of risk. Megapower Makmur TBK is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  7,500  in Megapower Makmur TBK on October 25, 2024 and sell it today you would earn a total of  2,900  from holding Megapower Makmur TBK or generate 38.67% return on investment over 90 days.

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

Sumber Energi Andalan  vs.  Megapower Makmur TBK

Sumber Energi Andalan

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sumber Energi Andalan are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Sumber Energi disclosed solid returns over the last few months and may actually be approaching a breakup point.

Megapower Makmur TBK

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Megapower Makmur TBK are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Megapower Makmur disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sumber Energi and Megapower Makmur

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

The idea behind Sumber Energi Andalan and Megapower Makmur 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 Transaction History module to view history of all your transactions and understand their impact on performance.