Correlation Between Matahari Department and Adhi Karya

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

By analyzing existing cross correlation between Matahari Department Store and Adhi Karya Persero, you can compare the effects of market volatilities on Matahari Department and Adhi Karya 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 Matahari Department with a short position of Adhi Karya. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matahari Department and Adhi Karya.

Diversification Opportunities for Matahari Department and Adhi Karya

-0.68

Correlation Coefficient

Matahari Department  Adhi Karya

Excellent diversification

The 3 months correlation between Matahari and Adhi is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Matahari Department Store and Adhi Karya Persero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adhi Karya Persero and Matahari Department 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 Matahari Department Store are associated (or correlated) with Adhi Karya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adhi Karya Persero has no effect on the direction of Matahari Department i.e., Matahari Department and Adhi Karya go up and down completely randomly.

Pair Corralation between Matahari Department and Adhi Karya

Assuming the 90 days trading horizon Matahari Department Store is expected to generate 0.37 times more return on investment than Adhi Karya. However, Matahari Department Store is 2.73 times less risky than Adhi Karya. It trades about 0.27 of its potential returns per unit of risk. Adhi Karya Persero is currently generating about 0.06 per unit of risk. If you would invest  140,500  in Matahari Department Store on December 30, 2024 and sell it today you would earn a total of  52,000  from holding Matahari Department Store or generate 37.01% return on investment over 90 days.

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

Matahari Department Store  vs.  Adhi Karya Persero

Matahari Department Store

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Matahari Department Store are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Matahari Department disclosed solid returns over the last few months and may actually be approaching a breakup point.

Adhi Karya Persero

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Adhi Karya Persero are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Adhi Karya disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Matahari Department and Adhi Karya

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

The idea behind Matahari Department Store and Adhi Karya Persero 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.