Correlation Between Merck Tbk and Mustika Ratu

Can any of the company-specific risk be diversified away by investing in both Merck Tbk and Mustika Ratu 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 Merck Tbk and Mustika Ratu into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Merck Tbk and Mustika Ratu

0.18

Correlation Coefficient

Merck Tbk  Mustika Ratu

Average diversification

The 3 months correlation between Merck and Mustika is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Merck Tbk and Mustika Ratu Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mustika Ratu Tbk and Merck Tbk 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 Merck Tbk are associated (or correlated) with Mustika Ratu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mustika Ratu Tbk has no effect on the direction of Merck Tbk i.e., Merck Tbk and Mustika Ratu go up and down completely randomly.

Pair Corralation between Merck Tbk and Mustika Ratu

Assuming the 90 days trading horizon Merck Tbk is expected to generate 0.49 times more return on investment than Mustika Ratu. However, Merck Tbk is 2.03 times less risky than Mustika Ratu. It trades about 0.0 of its potential returns per unit of risk. Mustika Ratu Tbk is currently generating about -0.19 per unit of risk. If you would invest  343,000  in Merck Tbk on November 29, 2024 and sell it today you would lose (2,000) from holding Merck Tbk or give up 0.58% of portfolio value over 90 days.

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

Merck Tbk  vs.  Mustika Ratu Tbk

Merck Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Merck Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Merck Tbk is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Mustika Ratu Tbk

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Merck Tbk and Mustika Ratu

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

The idea behind Merck Tbk and Mustika Ratu Tbk 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.