Correlation Between Matahari Department and Soechi Lines

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

Diversification Opportunities for Matahari Department and Soechi Lines

0.66

Correlation Coefficient

Matahari Department  Soechi Lines

Poor diversification

The 3 months correlation between Matahari and Soechi is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Matahari Department Store and Soechi Lines Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Soechi Lines 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 Soechi Lines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Soechi Lines Tbk has no effect on the direction of Matahari Department i.e., Matahari Department and Soechi Lines go up and down completely randomly.

Pair Corralation between Matahari Department and Soechi Lines

Assuming the 90 days trading horizon Matahari Department Store is expected to generate 1.49 times more return on investment than Soechi Lines. However, Matahari Department is 1.49 times more volatile than Soechi Lines Tbk. It trades about -0.01 of its potential returns per unit of risk. Soechi Lines Tbk is currently generating about -0.04 per unit of risk. If you would invest  169,155  in Matahari Department Store on October 27, 2024 and sell it today you would lose (18,155) from holding Matahari Department Store or give up 10.73% of portfolio value over 90 days.

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

Matahari Department Store  vs.  Soechi Lines 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 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.

Soechi Lines Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Soechi Lines Tbk 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 Soechi Lines

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

The idea behind Matahari Department Store and Soechi Lines 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.