Correlation Between Matahari Department and Adi Sarana

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

Diversification Opportunities for Matahari Department and Adi Sarana

0.47

Correlation Coefficient

Matahari Department  Adi Sarana

Very weak diversification

The 3 months correlation between Matahari and Adi is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Matahari Department Store and Adi Sarana Armada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adi Sarana Armada 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 Adi Sarana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adi Sarana Armada has no effect on the direction of Matahari Department i.e., Matahari Department and Adi Sarana go up and down completely randomly.

Pair Corralation between Matahari Department and Adi Sarana

Assuming the 90 days trading horizon Matahari Department Store is expected to under-perform the Adi Sarana. But the stock apears to be less risky and, when comparing its historical volatility, Matahari Department Store is 1.14 times less risky than Adi Sarana. The stock trades about -0.01 of its potential returns per unit of risk. The Adi Sarana Armada is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  74,604  in Adi Sarana Armada on October 27, 2024 and sell it today you would lose (8,604) from holding Adi Sarana Armada or give up 11.53% of portfolio value over 90 days.

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

Matahari Department Store  vs.  Adi Sarana Armada

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 quite persistent forward-looking signals, Matahari Department is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Adi Sarana Armada

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Matahari Department and Adi Sarana

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

The idea behind Matahari Department Store and Adi Sarana Armada 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.