Correlation Between Lion Metal and PT Mandiri

Can any of the company-specific risk be diversified away by investing in both Lion Metal and PT Mandiri 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 PT Mandiri 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 PT Mandiri Herindo, you can compare the effects of market volatilities on Lion Metal and PT Mandiri 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 PT Mandiri. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lion Metal and PT Mandiri.

Diversification Opportunities for Lion Metal and PT Mandiri

0.08

Correlation Coefficient

Lion Metal  PT Mandiri

Significant diversification

The 3 months correlation between Lion and MAHA is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Lion Metal Works and PT Mandiri Herindo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Mandiri Herindo 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 PT Mandiri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Mandiri Herindo has no effect on the direction of Lion Metal i.e., Lion Metal and PT Mandiri go up and down completely randomly.

Pair Corralation between Lion Metal and PT Mandiri

Assuming the 90 days trading horizon Lion Metal Works is expected to generate 5.39 times more return on investment than PT Mandiri. However, Lion Metal is 5.39 times more volatile than PT Mandiri Herindo. It trades about 0.02 of its potential returns per unit of risk. PT Mandiri Herindo is currently generating about -0.2 per unit of risk. If you would invest  38,000  in Lion Metal Works on October 21, 2024 and sell it today you would lose (3,000) from holding Lion Metal Works or give up 7.89% of portfolio value over 90 days.

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

Lion Metal Works  vs.  PT Mandiri Herindo

Lion Metal Works

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lion Metal Works are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Lion Metal may actually be approaching a critical reversion point that can send shares even higher in February 2025.

PT Mandiri Herindo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Mandiri Herindo 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 February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Lion Metal and PT Mandiri

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

The idea behind Lion Metal Works and PT Mandiri Herindo 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.