Correlation Between Kirana Megatara and Madusari Murni

Can any of the company-specific risk be diversified away by investing in both Kirana Megatara and Madusari Murni 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 Kirana Megatara and Madusari Murni into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kirana Megatara Tbk and Madusari Murni Indah, you can compare the effects of market volatilities on Kirana Megatara and Madusari Murni 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 Kirana Megatara with a short position of Madusari Murni. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kirana Megatara and Madusari Murni.

Diversification Opportunities for Kirana Megatara and Madusari Murni

0.29

Correlation Coefficient

Kirana Megatara  Madusari Murni

Modest diversification

The 3 months correlation between Kirana and Madusari is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Kirana Megatara Tbk and Madusari Murni Indah in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madusari Murni Indah and Kirana Megatara 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 Kirana Megatara Tbk are associated (or correlated) with Madusari Murni. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madusari Murni Indah has no effect on the direction of Kirana Megatara i.e., Kirana Megatara and Madusari Murni go up and down completely randomly.

Pair Corralation between Kirana Megatara and Madusari Murni

Assuming the 90 days trading horizon Kirana Megatara is expected to generate 1.1 times less return on investment than Madusari Murni. But when comparing it to its historical volatility, Kirana Megatara Tbk is 1.19 times less risky than Madusari Murni. It trades about 0.03 of its potential returns per unit of risk. Madusari Murni Indah is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  19,049  in Madusari Murni Indah on October 12, 2024 and sell it today you would earn a total of  2,351  from holding Madusari Murni Indah or generate 12.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Kirana Megatara Tbk  vs.  Madusari Murni Indah

Kirana Megatara Tbk

Risk-Adjusted Performance

8 of 100

OK

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

Madusari Murni Indah

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Madusari Murni Indah has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Kirana Megatara and Madusari Murni

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

The idea behind Kirana Megatara Tbk and Madusari Murni Indah 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.