Correlation Between Mitra Energi and Kmw

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

By analyzing existing cross correlation between Mitra Energi Persada and Kmw Inc, you can compare the effects of market volatilities on Mitra Energi and Kmw 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 Mitra Energi with a short position of Kmw. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mitra Energi and Kmw.

Diversification Opportunities for Mitra Energi and Kmw

-0.28

Correlation Coefficient

Mitra Energi  Kmw

Very good diversification

The 3 months correlation between Mitra and Kmw is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Mitra Energi Persada and Kmw Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kmw Inc and Mitra 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 Mitra Energi Persada are associated (or correlated) with Kmw. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kmw Inc has no effect on the direction of Mitra Energi i.e., Mitra Energi and Kmw go up and down completely randomly.

Pair Corralation between Mitra Energi and Kmw

Assuming the 90 days trading horizon Mitra Energi Persada is expected to generate 1.35 times more return on investment than Kmw. However, Mitra Energi is 1.35 times more volatile than Kmw Inc. It trades about 0.21 of its potential returns per unit of risk. Kmw Inc is currently generating about 0.01 per unit of risk. If you would invest  58,500  in Mitra Energi Persada on December 21, 2024 and sell it today you would earn a total of  35,000  from holding Mitra Energi Persada or generate 59.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.28%
Values	Daily Returns

Mitra Energi Persada  vs.  Kmw Inc

Mitra Energi Persada

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mitra Energi Persada are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Mitra Energi disclosed solid returns over the last few months and may actually be approaching a breakup point.

Kmw Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kmw Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Kmw is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mitra Energi and Kmw

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

The idea behind Mitra Energi Persada and Kmw Inc 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.