Correlation Between Mahkota Group and Diamond Food

Can any of the company-specific risk be diversified away by investing in both Mahkota Group and Diamond Food 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 Mahkota Group and Diamond Food into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Mahkota Group and Diamond Food

0.07

Correlation Coefficient

Mahkota Group  Diamond Food

Significant diversification

The 3 months correlation between Mahkota and Diamond is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Mahkota Group Tbk and Diamond Food Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Food Indonesia and Mahkota Group 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 Mahkota Group Tbk are associated (or correlated) with Diamond Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamond Food Indonesia has no effect on the direction of Mahkota Group i.e., Mahkota Group and Diamond Food go up and down completely randomly.

Pair Corralation between Mahkota Group and Diamond Food

Assuming the 90 days trading horizon Mahkota Group Tbk is expected to generate 0.8 times more return on investment than Diamond Food. However, Mahkota Group Tbk is 1.25 times less risky than Diamond Food. It trades about -0.06 of its potential returns per unit of risk. Diamond Food Indonesia is currently generating about -0.06 per unit of risk. If you would invest  70,000  in Mahkota Group Tbk on December 24, 2024 and sell it today you would lose (3,500) from holding Mahkota Group Tbk or give up 5.0% of portfolio value over 90 days.

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

Mahkota Group Tbk  vs.  Diamond Food Indonesia

Mahkota Group Tbk

Risk-Adjusted Performance

Very Weak

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

Diamond Food Indonesia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Diamond Food Indonesia 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 Mahkota Group and Diamond Food

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

The idea behind Mahkota Group Tbk and Diamond Food Indonesia 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.