Correlation Between Matahari Department and Blue Bird

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

Diversification Opportunities for Matahari Department and Blue Bird

-0.56

Correlation Coefficient

Matahari Department  Blue Bird

Excellent diversification

The 3 months correlation between Matahari and Blue is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Matahari Department Store and Blue Bird Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Bird 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 Blue Bird. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Bird Tbk has no effect on the direction of Matahari Department i.e., Matahari Department and Blue Bird go up and down completely randomly.

Pair Corralation between Matahari Department and Blue Bird

Assuming the 90 days trading horizon Matahari Department Store is expected to generate 1.37 times more return on investment than Blue Bird. However, Matahari Department is 1.37 times more volatile than Blue Bird Tbk. It trades about 0.36 of its potential returns per unit of risk. Blue Bird Tbk is currently generating about -0.11 per unit of risk. If you would invest  136,500  in Matahari Department Store on December 21, 2024 and sell it today you would earn a total of  67,500  from holding Matahari Department Store or generate 49.45% 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.  Blue Bird Tbk

Matahari Department Store

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Matahari Department Store are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward-looking signals, Matahari Department disclosed solid returns over the last few months and may actually be approaching a breakup point.

Blue Bird Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Blue Bird Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak 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 Matahari Department and Blue Bird

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

The idea behind Matahari Department Store and Blue Bird 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.

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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.