Correlation Between Langgeng Makmur and Multi Medika

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

By analyzing existing cross correlation between Langgeng Makmur Industri and Multi Medika Internasional, you can compare the effects of market volatilities on Langgeng Makmur and Multi Medika 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 Langgeng Makmur with a short position of Multi Medika. Check out your portfolio center. Please also check ongoing floating volatility patterns of Langgeng Makmur and Multi Medika.

Diversification Opportunities for Langgeng Makmur and Multi Medika

-0.13

Correlation Coefficient

Langgeng Makmur  Multi Medika

Good diversification

The 3 months correlation between Langgeng and Multi is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Langgeng Makmur Industri and Multi Medika Internasional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi Medika Interna and Langgeng Makmur 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 Langgeng Makmur Industri are associated (or correlated) with Multi Medika. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multi Medika Interna has no effect on the direction of Langgeng Makmur i.e., Langgeng Makmur and Multi Medika go up and down completely randomly.

Pair Corralation between Langgeng Makmur and Multi Medika

Assuming the 90 days trading horizon Langgeng Makmur Industri is expected to generate 0.71 times more return on investment than Multi Medika. However, Langgeng Makmur Industri is 1.41 times less risky than Multi Medika. It trades about 0.0 of its potential returns per unit of risk. Multi Medika Internasional is currently generating about 0.0 per unit of risk. If you would invest  13,600  in Langgeng Makmur Industri on December 28, 2024 and sell it today you would lose (1,500) from holding Langgeng Makmur Industri or give up 11.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Langgeng Makmur Industri  vs.  Multi Medika Internasional

Langgeng Makmur Industri

Risk-Adjusted Performance

Very Weak

Over the last 90 days Langgeng Makmur Industri has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Langgeng Makmur is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Multi Medika Interna

Risk-Adjusted Performance

Very Weak

Over the last 90 days Multi Medika Internasional has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Multi Medika 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 Langgeng Makmur and Multi Medika

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

The idea behind Langgeng Makmur Industri and Multi Medika Internasional 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..