Correlation Between Metropolitan Kentjana and City Retail

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

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

Diversification Opportunities for Metropolitan Kentjana and City Retail

0.31

Correlation Coefficient

Metropolitan Kentjana  City Retail

Weak diversification

The 3 months correlation between Metropolitan and City is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Metropolitan Kentjana Tbk and City Retail Developments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City Retail Developments and Metropolitan Kentjana 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 Metropolitan Kentjana Tbk are associated (or correlated) with City Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of City Retail Developments has no effect on the direction of Metropolitan Kentjana i.e., Metropolitan Kentjana and City Retail go up and down completely randomly.

Pair Corralation between Metropolitan Kentjana and City Retail

Assuming the 90 days trading horizon Metropolitan Kentjana Tbk is expected to generate 3.9 times more return on investment than City Retail. However, Metropolitan Kentjana is 3.9 times more volatile than City Retail Developments. It trades about -0.02 of its potential returns per unit of risk. City Retail Developments is currently generating about -0.15 per unit of risk. If you would invest  2,595,000  in Metropolitan Kentjana Tbk on December 2, 2024 and sell it today you would lose (147,500) from holding Metropolitan Kentjana Tbk or give up 5.68% of portfolio value over 90 days.

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

Metropolitan Kentjana Tbk  vs.  City Retail Developments

Metropolitan Kentjana Tbk

Risk-Adjusted Performance

Very Weak

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

City Retail Developments

Risk-Adjusted Performance

Very Weak

Over the last 90 days City Retail Developments 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 Metropolitan Kentjana and City Retail

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

The idea behind Metropolitan Kentjana Tbk and City Retail Developments 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.