Correlation Between Matahari Department and Lancartama Sejati

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

Diversification Opportunities for Matahari Department and Lancartama Sejati

0.09

Correlation Coefficient

Matahari Department  Lancartama Sejati

Significant diversification

The 3 months correlation between Matahari and Lancartama is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Matahari Department Store and Lancartama Sejati Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lancartama Sejati 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 Lancartama Sejati. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lancartama Sejati Tbk has no effect on the direction of Matahari Department i.e., Matahari Department and Lancartama Sejati go up and down completely randomly.

Pair Corralation between Matahari Department and Lancartama Sejati

Assuming the 90 days trading horizon Matahari Department is expected to generate 6.57 times less return on investment than Lancartama Sejati. But when comparing it to its historical volatility, Matahari Department Store is 3.5 times less risky than Lancartama Sejati. It trades about 0.38 of its potential returns per unit of risk. Lancartama Sejati Tbk is currently generating about 0.71 of returns per unit of risk over similar time horizon. If you would invest  1,400  in Lancartama Sejati Tbk on October 24, 2024 and sell it today you would earn a total of  1,000.00  from holding Lancartama Sejati Tbk or generate 71.43% return on investment over 90 days.

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

Matahari Department Store  vs.  Lancartama Sejati 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 latest conflicting 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.

Lancartama Sejati Tbk

Risk-Adjusted Performance

19 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lancartama Sejati Tbk are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Lancartama Sejati disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Matahari Department and Lancartama Sejati

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

The idea behind Matahari Department Store and Lancartama Sejati 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.