Correlation Between Modern Internasional and Ramayana Lestari

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

Diversification Opportunities for Modern Internasional and Ramayana Lestari

0.76

Correlation Coefficient

Modern Internasional  Ramayana Lestari

Poor diversification

The 3 months correlation between Modern and Ramayana is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Modern Internasional Tbk and Ramayana Lestari Sentosa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ramayana Lestari Sentosa 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 Ramayana Lestari. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ramayana Lestari Sentosa has no effect on the direction of Modern Internasional i.e., Modern Internasional and Ramayana Lestari go up and down completely randomly.

Pair Corralation between Modern Internasional and Ramayana Lestari

Assuming the 90 days trading horizon Modern Internasional Tbk is expected to under-perform the Ramayana Lestari. In addition to that, Modern Internasional is 8.41 times more volatile than Ramayana Lestari Sentosa. It trades about -0.04 of its total potential returns per unit of risk. Ramayana Lestari Sentosa is currently generating about -0.11 per unit of volatility. If you would invest  39,800  in Ramayana Lestari Sentosa on September 3, 2024 and sell it today you would lose (2,600) from holding Ramayana Lestari Sentosa or give up 6.53% of portfolio value over 90 days.

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

Modern Internasional Tbk  vs.  Ramayana Lestari Sentosa

Modern Internasional Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Modern Internasional Tbk 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 January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Ramayana Lestari Sentosa

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ramayana Lestari Sentosa 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 Ramayana Lestari

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

The idea behind Modern Internasional Tbk and Ramayana Lestari Sentosa 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.