Correlation Between Modern Internasional and Langgeng Makmur

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

Diversification Opportunities for Modern Internasional and Langgeng Makmur

-0.3

Correlation Coefficient

Modern Internasional  Langgeng Makmur

Very good diversification

The 3 months correlation between Modern and Langgeng is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Modern Internasional Tbk and Langgeng Makmur Industri in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Langgeng Makmur Industri 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 Langgeng Makmur. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Langgeng Makmur Industri has no effect on the direction of Modern Internasional i.e., Modern Internasional and Langgeng Makmur go up and down completely randomly.

Pair Corralation between Modern Internasional and Langgeng Makmur

Assuming the 90 days trading horizon Modern Internasional Tbk is expected to generate 1.63 times more return on investment than Langgeng Makmur. However, Modern Internasional is 1.63 times more volatile than Langgeng Makmur Industri. It trades about 0.02 of its potential returns per unit of risk. Langgeng Makmur Industri is currently generating about -0.03 per unit of risk. If you would invest  700.00  in Modern Internasional Tbk on December 1, 2024 and sell it today you would lose (100.00) from holding Modern Internasional Tbk or give up 14.29% of portfolio value over 90 days.

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

Modern Internasional Tbk  vs.  Langgeng Makmur Industri

Modern Internasional Tbk

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Modern Internasional Tbk are ranked lower than 1 (%) 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.

Langgeng Makmur Industri

Risk-Adjusted Performance

Very Weak

Over the last 90 days Langgeng Makmur Industri 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 Modern Internasional and Langgeng Makmur

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

The idea behind Modern Internasional Tbk and Langgeng Makmur Industri 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.