Correlation Between Link Net and MD Pictures

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

By analyzing existing cross correlation between Link Net Tbk and MD Pictures Tbk, you can compare the effects of market volatilities on Link Net and MD Pictures 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 Link Net with a short position of MD Pictures. Check out your portfolio center. Please also check ongoing floating volatility patterns of Link Net and MD Pictures.

Diversification Opportunities for Link Net and MD Pictures

0.56

Correlation Coefficient

Link Net  MD Pictures

Very weak diversification

The 3 months correlation between Link and FILM is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Link Net Tbk and MD Pictures Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MD Pictures Tbk and Link Net 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 Link Net Tbk are associated (or correlated) with MD Pictures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MD Pictures Tbk has no effect on the direction of Link Net i.e., Link Net and MD Pictures go up and down completely randomly.

Pair Corralation between Link Net and MD Pictures

Assuming the 90 days trading horizon Link Net Tbk is expected to under-perform the MD Pictures. But the stock apears to be less risky and, when comparing its historical volatility, Link Net Tbk is 1.23 times less risky than MD Pictures. The stock trades about -0.21 of its potential returns per unit of risk. The MD Pictures Tbk is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  400,000  in MD Pictures Tbk on December 4, 2024 and sell it today you would lose (41,000) from holding MD Pictures Tbk or give up 10.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Link Net Tbk  vs.  MD Pictures Tbk

Link Net Tbk

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Link Net Tbk are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Link Net disclosed solid returns over the last few months and may actually be approaching a breakup point.

MD Pictures Tbk

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MD Pictures Tbk are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, MD Pictures 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 Link Net and MD Pictures

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

The idea behind Link Net Tbk and MD Pictures 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.