Correlation Between Merdeka Copper and Megapower Makmur

Can any of the company-specific risk be diversified away by investing in both Merdeka Copper and Megapower Makmur 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 Merdeka Copper and Megapower Makmur into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Merdeka Copper Gold and Megapower Makmur TBK, you can compare the effects of market volatilities on Merdeka Copper and Megapower Makmur 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 Merdeka Copper with a short position of Megapower Makmur. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merdeka Copper and Megapower Makmur.

Diversification Opportunities for Merdeka Copper and Megapower Makmur

-0.43

Correlation Coefficient

Merdeka Copper  Megapower Makmur

Very good diversification

The 3 months correlation between Merdeka and Megapower is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Merdeka Copper Gold and Megapower Makmur TBK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Megapower Makmur TBK and Merdeka Copper 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 Merdeka Copper Gold are associated (or correlated) with Megapower Makmur. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Megapower Makmur TBK has no effect on the direction of Merdeka Copper i.e., Merdeka Copper and Megapower Makmur go up and down completely randomly.

Pair Corralation between Merdeka Copper and Megapower Makmur

Assuming the 90 days trading horizon Merdeka Copper Gold is expected to under-perform the Megapower Makmur. But the stock apears to be less risky and, when comparing its historical volatility, Merdeka Copper Gold is 2.18 times less risky than Megapower Makmur. The stock trades about -0.2 of its potential returns per unit of risk. The Megapower Makmur TBK is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  7,500  in Megapower Makmur TBK on October 25, 2024 and sell it today you would earn a total of  2,900  from holding Megapower Makmur TBK or generate 38.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Merdeka Copper Gold  vs.  Megapower Makmur TBK

Merdeka Copper Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Merdeka Copper Gold 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.

Megapower Makmur TBK

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Megapower Makmur TBK are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Megapower Makmur disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Merdeka Copper and Megapower Makmur

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

The idea behind Merdeka Copper Gold and Megapower Makmur 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.