Correlation Between Multi Indocitra and Multi Spunindo

Can any of the company-specific risk be diversified away by investing in both Multi Indocitra and Multi Spunindo 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 Spunindo 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 Spunindo Jaya, you can compare the effects of market volatilities on Multi Indocitra and Multi Spunindo 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 Spunindo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Multi Indocitra and Multi Spunindo.

Diversification Opportunities for Multi Indocitra and Multi Spunindo

0.28

Correlation Coefficient

Multi Indocitra  Multi Spunindo

Modest diversification

The 3 months correlation between Multi and Multi is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Multi Indocitra Tbk and Multi Spunindo Jaya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi Spunindo Jaya 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 Spunindo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multi Spunindo Jaya has no effect on the direction of Multi Indocitra i.e., Multi Indocitra and Multi Spunindo go up and down completely randomly.

Pair Corralation between Multi Indocitra and Multi Spunindo

Assuming the 90 days trading horizon Multi Indocitra Tbk is expected to generate 0.38 times more return on investment than Multi Spunindo. However, Multi Indocitra Tbk is 2.66 times less risky than Multi Spunindo. It trades about -0.01 of its potential returns per unit of risk. Multi Spunindo Jaya is currently generating about -0.03 per unit of risk. If you would invest  53,000  in Multi Indocitra Tbk on September 3, 2024 and sell it today you would lose (1,000.00) from holding Multi Indocitra Tbk or give up 1.89% of portfolio value over 90 days.

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

Multi Indocitra Tbk  vs.  Multi Spunindo Jaya

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 Spunindo Jaya

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Multi Spunindo Jaya 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 Multi Indocitra and Multi Spunindo

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

The idea behind Multi Indocitra Tbk and Multi Spunindo Jaya 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.