Correlation Between Modern Internasional and Inter Delta

Can any of the company-specific risk be diversified away by investing in both Modern Internasional and Inter Delta 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 Modern Internasional and Inter Delta into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Modern Internasional Tbk and Inter Delta Tbk, you can compare the effects of market volatilities on Modern Internasional and Inter Delta 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 Modern Internasional with a short position of Inter Delta. Check out your portfolio center. Please also check ongoing floating volatility patterns of Modern Internasional and Inter Delta.

Diversification Opportunities for Modern Internasional and Inter Delta

0.2

Correlation Coefficient

Modern Internasional  Inter Delta

Modest diversification

The 3 months correlation between Modern and Inter is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Modern Internasional Tbk and Inter Delta Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inter Delta Tbk and Modern Internasional 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 Modern Internasional Tbk are associated (or correlated) with Inter Delta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inter Delta Tbk has no effect on the direction of Modern Internasional i.e., Modern Internasional and Inter Delta go up and down completely randomly.

Pair Corralation between Modern Internasional and Inter Delta

Assuming the 90 days trading horizon Modern Internasional Tbk is expected to generate 1.06 times more return on investment than Inter Delta. However, Modern Internasional is 1.06 times more volatile than Inter Delta Tbk. It trades about 0.04 of its potential returns per unit of risk. Inter Delta Tbk is currently generating about 0.03 per unit of risk. If you would invest  700.00  in Modern Internasional Tbk on September 16, 2024 and sell it today you would earn a total of  0.00  from holding Modern Internasional Tbk or generate 0.0% return on investment over 90 days.

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

Modern Internasional Tbk  vs.  Inter Delta Tbk

Modern Internasional Tbk

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Modern Internasional Tbk are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Modern Internasional disclosed solid returns over the last few months and may actually be approaching a breakup point.

Inter Delta Tbk

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Inter Delta Tbk are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Inter Delta disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Modern Internasional and Inter Delta

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

The idea behind Modern Internasional Tbk and Inter Delta 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.