Correlation Between Japfa Comfeed and Bank Mega

Can any of the company-specific risk be diversified away by investing in both Japfa Comfeed and Bank Mega 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 Japfa Comfeed and Bank Mega into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Japfa Comfeed and Bank Mega

-0.59

Correlation Coefficient

Japfa Comfeed  Bank Mega

Excellent diversification

The 3 months correlation between Japfa and Bank is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Japfa Comfeed Indonesia and Bank Mega Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Mega Tbk and Japfa Comfeed 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 Japfa Comfeed Indonesia are associated (or correlated) with Bank Mega. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Mega Tbk has no effect on the direction of Japfa Comfeed i.e., Japfa Comfeed and Bank Mega go up and down completely randomly.

Pair Corralation between Japfa Comfeed and Bank Mega

Assuming the 90 days trading horizon Japfa Comfeed Indonesia is expected to generate 3.47 times more return on investment than Bank Mega. However, Japfa Comfeed is 3.47 times more volatile than Bank Mega Tbk. It trades about 0.1 of its potential returns per unit of risk. Bank Mega Tbk is currently generating about -0.09 per unit of risk. If you would invest  151,109  in Japfa Comfeed Indonesia on September 3, 2024 and sell it today you would earn a total of  20,391  from holding Japfa Comfeed Indonesia or generate 13.49% return on investment over 90 days.

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

Japfa Comfeed Indonesia  vs.  Bank Mega Tbk

Japfa Comfeed Indonesia

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Japfa Comfeed Indonesia are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Japfa Comfeed disclosed solid returns over the last few months and may actually be approaching a breakup point.

Bank Mega Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank Mega Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Bank Mega 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 Japfa Comfeed and Bank Mega

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

The idea behind Japfa Comfeed Indonesia and Bank Mega 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.