Correlation Between Lion Metal and Hero Supermarket

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

By analyzing existing cross correlation between Lion Metal Works and Hero Supermarket Tbk, you can compare the effects of market volatilities on Lion Metal and Hero Supermarket 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 Lion Metal with a short position of Hero Supermarket. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lion Metal and Hero Supermarket.

Diversification Opportunities for Lion Metal and Hero Supermarket

0.8

Correlation Coefficient

Lion Metal  Hero Supermarket

Very poor diversification

The 3 months correlation between Lion and Hero is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Lion Metal Works and Hero Supermarket Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hero Supermarket Tbk and Lion Metal 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 Lion Metal Works are associated (or correlated) with Hero Supermarket. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hero Supermarket Tbk has no effect on the direction of Lion Metal i.e., Lion Metal and Hero Supermarket go up and down completely randomly.

Pair Corralation between Lion Metal and Hero Supermarket

Assuming the 90 days trading horizon Lion Metal Works is expected to under-perform the Hero Supermarket. In addition to that, Lion Metal is 1.25 times more volatile than Hero Supermarket Tbk. It trades about -0.14 of its total potential returns per unit of risk. Hero Supermarket Tbk is currently generating about -0.08 per unit of volatility. If you would invest  65,500  in Hero Supermarket Tbk on September 3, 2024 and sell it today you would lose (8,500) from holding Hero Supermarket Tbk or give up 12.98% of portfolio value over 90 days.

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

Lion Metal Works  vs.  Hero Supermarket Tbk

Lion Metal Works

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lion Metal Works has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Hero Supermarket Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hero Supermarket Tbk 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 Lion Metal and Hero Supermarket

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

The idea behind Lion Metal Works and Hero Supermarket 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.