Correlation Between Multi Indocitra and Multi Prima

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

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

Diversification Opportunities for Multi Indocitra and Multi Prima

-0.12

Correlation Coefficient

Multi Indocitra  Multi Prima

Good diversification

The 3 months correlation between Multi and Multi is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Multi Indocitra Tbk and Multi Prima Sejahtera in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi Prima Sejahtera and Multi Indocitra 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 Multi Indocitra Tbk are associated (or correlated) with Multi Prima. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multi Prima Sejahtera has no effect on the direction of Multi Indocitra i.e., Multi Indocitra and Multi Prima go up and down completely randomly.

Pair Corralation between Multi Indocitra and Multi Prima

Assuming the 90 days trading horizon Multi Indocitra Tbk is expected to under-perform the Multi Prima. But the stock apears to be less risky and, when comparing its historical volatility, Multi Indocitra Tbk is 1.19 times less risky than Multi Prima. The stock trades about -0.01 of its potential returns per unit of risk. The Multi Prima Sejahtera is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  35,800  in Multi Prima Sejahtera on September 1, 2024 and sell it today you would earn a total of  3,600  from holding Multi Prima Sejahtera or generate 10.06% return on investment over 90 days.

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

Multi Indocitra Tbk  vs.  Multi Prima Sejahtera

Multi Indocitra Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

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

Multi Prima Sejahtera

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Multi Prima Sejahtera are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Multi Prima may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Multi Indocitra and Multi Prima

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

The idea behind Multi Indocitra Tbk and Multi Prima Sejahtera 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.