Correlation Between Menthobi Karyatama and Citra Borneo

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

By analyzing existing cross correlation between Menthobi Karyatama Raya and Citra Borneo Utama, you can compare the effects of market volatilities on Menthobi Karyatama and Citra Borneo 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 Menthobi Karyatama with a short position of Citra Borneo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Menthobi Karyatama and Citra Borneo.

Diversification Opportunities for Menthobi Karyatama and Citra Borneo

0.43

Correlation Coefficient

Menthobi Karyatama  Citra Borneo

Very weak diversification

The 3 months correlation between Menthobi and Citra is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Menthobi Karyatama Raya and Citra Borneo Utama in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citra Borneo Utama and Menthobi Karyatama 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 Menthobi Karyatama Raya are associated (or correlated) with Citra Borneo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citra Borneo Utama has no effect on the direction of Menthobi Karyatama i.e., Menthobi Karyatama and Citra Borneo go up and down completely randomly.

Pair Corralation between Menthobi Karyatama and Citra Borneo

Assuming the 90 days trading horizon Menthobi Karyatama Raya is expected to generate 0.15 times more return on investment than Citra Borneo. However, Menthobi Karyatama Raya is 6.5 times less risky than Citra Borneo. It trades about -0.08 of its potential returns per unit of risk. Citra Borneo Utama is currently generating about -0.11 per unit of risk. If you would invest  12,100  in Menthobi Karyatama Raya on October 7, 2024 and sell it today you would lose (100.00) from holding Menthobi Karyatama Raya or give up 0.83% of portfolio value over 90 days.

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

Menthobi Karyatama Raya  vs.  Citra Borneo Utama

Menthobi Karyatama Raya

Risk-Adjusted Performance

0 of 100

Very Weak

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

Citra Borneo Utama

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Citra Borneo Utama has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Menthobi Karyatama and Citra Borneo

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

The idea behind Menthobi Karyatama Raya and Citra Borneo Utama 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.