Correlation Between Lion Metal and Multi Makmur

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

Diversification Opportunities for Lion Metal and Multi Makmur

0.48

Correlation Coefficient

Lion Metal  Multi Makmur

Very weak diversification

The 3 months correlation between Lion and Multi is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Lion Metal Works and Multi Makmur Lemindo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi Makmur Lemindo 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 Multi Makmur. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multi Makmur Lemindo has no effect on the direction of Lion Metal i.e., Lion Metal and Multi Makmur go up and down completely randomly.

Pair Corralation between Lion Metal and Multi Makmur

Assuming the 90 days trading horizon Lion Metal Works is expected to generate 1.77 times more return on investment than Multi Makmur. However, Lion Metal is 1.77 times more volatile than Multi Makmur Lemindo. It trades about 0.14 of its potential returns per unit of risk. Multi Makmur Lemindo is currently generating about 0.19 per unit of risk. If you would invest  28,000  in Lion Metal Works on December 1, 2024 and sell it today you would earn a total of  23,000  from holding Lion Metal Works or generate 82.14% return on investment over 90 days.

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

Lion Metal Works  vs.  Multi Makmur Lemindo

Lion Metal Works

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lion Metal Works are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Lion Metal disclosed solid returns over the last few months and may actually be approaching a breakup point.

Multi Makmur Lemindo

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Multi Makmur Lemindo are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Multi Makmur disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lion Metal and Multi Makmur

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

The idea behind Lion Metal Works and Multi Makmur Lemindo 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.

Check out your portfolio center.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.