Correlation Between Matahari Department and Transcoal Pacific

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

Diversification Opportunities for Matahari Department and Transcoal Pacific

-0.32

Correlation Coefficient

Matahari Department  Transcoal Pacific

Very good diversification

The 3 months correlation between Matahari and Transcoal is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Matahari Department Store and Transcoal Pacific Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transcoal Pacific 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 Transcoal Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transcoal Pacific Tbk has no effect on the direction of Matahari Department i.e., Matahari Department and Transcoal Pacific go up and down completely randomly.

Pair Corralation between Matahari Department and Transcoal Pacific

Assuming the 90 days trading horizon Matahari Department Store is expected to generate 0.71 times more return on investment than Transcoal Pacific. However, Matahari Department Store is 1.41 times less risky than Transcoal Pacific. It trades about 0.17 of its potential returns per unit of risk. Transcoal Pacific Tbk is currently generating about -0.06 per unit of risk. If you would invest  141,000  in Matahari Department Store on November 29, 2024 and sell it today you would earn a total of  18,500  from holding Matahari Department Store or generate 13.12% return on investment over 90 days.

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

Matahari Department Store  vs.  Transcoal Pacific Tbk

Matahari Department Store

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Matahari Department Store are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Matahari Department disclosed solid returns over the last few months and may actually be approaching a breakup point.

Transcoal Pacific Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Transcoal Pacific Tbk 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.

Pair Trading with Matahari Department and Transcoal Pacific

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

The idea behind Matahari Department Store and Transcoal Pacific 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.