Correlation Between Multi Indocitra and Panorama Sentrawisata

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

Diversification Opportunities for Multi Indocitra and Panorama Sentrawisata

-0.33

Correlation Coefficient

Multi Indocitra  Panorama Sentrawisata

Very good diversification

The 3 months correlation between Multi and Panorama is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Multi Indocitra Tbk and Panorama Sentrawisata Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Panorama Sentrawisata Tbk 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 Panorama Sentrawisata. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Panorama Sentrawisata Tbk has no effect on the direction of Multi Indocitra i.e., Multi Indocitra and Panorama Sentrawisata go up and down completely randomly.

Pair Corralation between Multi Indocitra and Panorama Sentrawisata

Assuming the 90 days trading horizon Multi Indocitra Tbk is expected to under-perform the Panorama Sentrawisata. In addition to that, Multi Indocitra is 1.66 times more volatile than Panorama Sentrawisata Tbk. It trades about -0.01 of its total potential returns per unit of risk. Panorama Sentrawisata Tbk is currently generating about 0.35 per unit of volatility. If you would invest  44,800  in Panorama Sentrawisata Tbk on September 2, 2024 and sell it today you would earn a total of  9,200  from holding Panorama Sentrawisata Tbk or generate 20.54% 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.  Panorama Sentrawisata Tbk

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.

Panorama Sentrawisata Tbk

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Panorama Sentrawisata Tbk are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Panorama Sentrawisata disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Multi Indocitra and Panorama Sentrawisata

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

The idea behind Multi Indocitra Tbk and Panorama Sentrawisata 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.