Correlation Between Modern Internasional and Jakarta Setiabudi

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

Diversification Opportunities for Modern Internasional and Jakarta Setiabudi

-0.63

Correlation Coefficient

Modern Internasional  Jakarta Setiabudi

Excellent diversification

The 3 months correlation between Modern and Jakarta is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Modern Internasional Tbk and Jakarta Setiabudi Internasiona in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jakarta Setiabudi 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 Jakarta Setiabudi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jakarta Setiabudi has no effect on the direction of Modern Internasional i.e., Modern Internasional and Jakarta Setiabudi go up and down completely randomly.

Pair Corralation between Modern Internasional and Jakarta Setiabudi

Assuming the 90 days trading horizon Modern Internasional is expected to generate 10.11 times less return on investment than Jakarta Setiabudi. But when comparing it to its historical volatility, Modern Internasional Tbk is 1.35 times less risky than Jakarta Setiabudi. It trades about 0.04 of its potential returns per unit of risk. Jakarta Setiabudi Internasional is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  188,000  in Jakarta Setiabudi Internasional on September 16, 2024 and sell it today you would earn a total of  892,000  from holding Jakarta Setiabudi Internasional or generate 474.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Modern Internasional Tbk  vs.  Jakarta Setiabudi Internasiona

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.

Jakarta Setiabudi

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Jakarta Setiabudi Internasional are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Jakarta Setiabudi disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Modern Internasional and Jakarta Setiabudi

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

The idea behind Modern Internasional Tbk and Jakarta Setiabudi Internasional 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.