Correlation Between MEGA METAL and Ihlas Holding

Can any of the company-specific risk be diversified away by investing in both MEGA METAL and Ihlas Holding 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 MEGA METAL and Ihlas Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MEGA METAL and Ihlas Holding AS, you can compare the effects of market volatilities on MEGA METAL and Ihlas Holding 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 MEGA METAL with a short position of Ihlas Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of MEGA METAL and Ihlas Holding.

Diversification Opportunities for MEGA METAL and Ihlas Holding

0.61

Correlation Coefficient

MEGA METAL  Ihlas Holding

Poor diversification

The 3 months correlation between MEGA and Ihlas is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding MEGA METAL and Ihlas Holding AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ihlas Holding AS and MEGA METAL 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 MEGA METAL are associated (or correlated) with Ihlas Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ihlas Holding AS has no effect on the direction of MEGA METAL i.e., MEGA METAL and Ihlas Holding go up and down completely randomly.

Pair Corralation between MEGA METAL and Ihlas Holding

Assuming the 90 days trading horizon MEGA METAL is expected to generate 0.4 times more return on investment than Ihlas Holding. However, MEGA METAL is 2.52 times less risky than Ihlas Holding. It trades about -0.04 of its potential returns per unit of risk. Ihlas Holding AS is currently generating about -0.12 per unit of risk. If you would invest  3,190  in MEGA METAL on December 21, 2024 and sell it today you would lose (192.00) from holding MEGA METAL or give up 6.02% of portfolio value over 90 days.

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

MEGA METAL  vs.  Ihlas Holding AS

MEGA METAL

Risk-Adjusted Performance

Very Weak

Over the last 90 days MEGA METAL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, MEGA METAL is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Ihlas Holding AS

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ihlas Holding AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with MEGA METAL and Ihlas Holding

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

The idea behind MEGA METAL and Ihlas Holding AS 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.