Correlation Between Multi Prima and Multi Spunindo

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

By analyzing existing cross correlation between Multi Prima Sejahtera and Multi Spunindo Jaya, you can compare the effects of market volatilities on Multi Prima and Multi Spunindo 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 Multi Prima with a short position of Multi Spunindo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Multi Prima and Multi Spunindo.

Diversification Opportunities for Multi Prima and Multi Spunindo

0.23

Correlation Coefficient

Multi Prima  Multi Spunindo

Modest diversification

The 3 months correlation between Multi and Multi is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Multi Prima Sejahtera and Multi Spunindo Jaya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi Spunindo Jaya and Multi Prima 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 Multi Prima Sejahtera are associated (or correlated) with Multi Spunindo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multi Spunindo Jaya has no effect on the direction of Multi Prima i.e., Multi Prima and Multi Spunindo go up and down completely randomly.

Pair Corralation between Multi Prima and Multi Spunindo

Assuming the 90 days trading horizon Multi Prima Sejahtera is expected to generate 1.11 times more return on investment than Multi Spunindo. However, Multi Prima is 1.11 times more volatile than Multi Spunindo Jaya. It trades about -0.01 of its potential returns per unit of risk. Multi Spunindo Jaya is currently generating about -0.08 per unit of risk. If you would invest  39,800  in Multi Prima Sejahtera on December 30, 2024 and sell it today you would lose (800.00) from holding Multi Prima Sejahtera or give up 2.01% of portfolio value over 90 days.

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

Multi Prima Sejahtera  vs.  Multi Spunindo Jaya

Multi Prima Sejahtera

Risk-Adjusted Performance

Very Weak

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

Multi Spunindo Jaya

Risk-Adjusted Performance

Very Weak

Over the last 90 days Multi Spunindo Jaya 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 Multi Prima and Multi Spunindo

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

The idea behind Multi Prima Sejahtera and Multi Spunindo Jaya 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.