Correlation Between Bank Mega and Sinar Mas

Can any of the company-specific risk be diversified away by investing in both Bank Mega and Sinar Mas 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 Bank Mega and Sinar Mas into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bank Mega Tbk and Sinar Mas Multiartha, you can compare the effects of market volatilities on Bank Mega and Sinar Mas 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 Bank Mega with a short position of Sinar Mas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Mega and Sinar Mas.

Diversification Opportunities for Bank Mega and Sinar Mas

-0.85

Correlation Coefficient

Bank Mega  Sinar Mas

Pay attention - limited upside

The 3 months correlation between Bank and Sinar is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mega Tbk and Sinar Mas Multiartha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinar Mas Multiartha and Bank Mega 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 Bank Mega Tbk are associated (or correlated) with Sinar Mas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinar Mas Multiartha has no effect on the direction of Bank Mega i.e., Bank Mega and Sinar Mas go up and down completely randomly.

Pair Corralation between Bank Mega and Sinar Mas

Assuming the 90 days trading horizon Bank Mega Tbk is expected to under-perform the Sinar Mas. In addition to that, Bank Mega is 1.96 times more volatile than Sinar Mas Multiartha. It trades about -0.12 of its total potential returns per unit of risk. Sinar Mas Multiartha is currently generating about 0.11 per unit of volatility. If you would invest  1,460,000  in Sinar Mas Multiartha on December 29, 2024 and sell it today you would earn a total of  90,000  from holding Sinar Mas Multiartha or generate 6.16% return on investment over 90 days.

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

Bank Mega Tbk  vs.  Sinar Mas Multiartha

Bank Mega Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bank Mega 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 April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Sinar Mas Multiartha

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sinar Mas Multiartha are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Sinar Mas may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Bank Mega and Sinar Mas

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

The idea behind Bank Mega Tbk and Sinar Mas Multiartha 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.