Correlation Between Matahari Department and Arwana Citramulia

Can any of the company-specific risk be diversified away by investing in both Matahari Department and Arwana Citramulia 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 Arwana Citramulia 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 Arwana Citramulia Tbk, you can compare the effects of market volatilities on Matahari Department and Arwana Citramulia 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 Arwana Citramulia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matahari Department and Arwana Citramulia.

Diversification Opportunities for Matahari Department and Arwana Citramulia

-0.48

Correlation Coefficient

Matahari Department  Arwana Citramulia

Very good diversification

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

Pair Corralation between Matahari Department and Arwana Citramulia

Assuming the 90 days trading horizon Matahari Department Store is expected to under-perform the Arwana Citramulia. In addition to that, Matahari Department is 1.23 times more volatile than Arwana Citramulia Tbk. It trades about -0.13 of its total potential returns per unit of risk. Arwana Citramulia Tbk is currently generating about 0.09 per unit of volatility. If you would invest  69,000  in Arwana Citramulia Tbk on September 3, 2024 and sell it today you would earn a total of  5,000  from holding Arwana Citramulia Tbk or generate 7.25% return on investment over 90 days.

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

Matahari Department Store  vs.  Arwana Citramulia Tbk

Matahari Department Store

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Matahari Department Store has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Arwana Citramulia Tbk

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Arwana Citramulia Tbk are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Arwana Citramulia may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Matahari Department and Arwana Citramulia

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

The idea behind Matahari Department Store and Arwana Citramulia Tbk 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.