Correlation Between Multi Bintang and Inocycle Technology

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

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

Diversification Opportunities for Multi Bintang and Inocycle Technology

0.73

Correlation Coefficient

Multi Bintang  Inocycle Technology

Poor diversification

The 3 months correlation between Multi and Inocycle is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Multi Bintang Indonesia and Inocycle Technology Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inocycle Technology Tbk and Multi Bintang 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 Bintang Indonesia are associated (or correlated) with Inocycle Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inocycle Technology Tbk has no effect on the direction of Multi Bintang i.e., Multi Bintang and Inocycle Technology go up and down completely randomly.

Pair Corralation between Multi Bintang and Inocycle Technology

Assuming the 90 days trading horizon Multi Bintang is expected to generate 1.03 times less return on investment than Inocycle Technology. But when comparing it to its historical volatility, Multi Bintang Indonesia is 1.81 times less risky than Inocycle Technology. It trades about 0.07 of its potential returns per unit of risk. Inocycle Technology Tbk is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  9,500  in Inocycle Technology Tbk on September 3, 2024 and sell it today you would earn a total of  500.00  from holding Inocycle Technology Tbk or generate 5.26% return on investment over 90 days.

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

Multi Bintang Indonesia  vs.  Inocycle Technology Tbk

Multi Bintang Indonesia

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Multi Bintang Indonesia are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Multi Bintang may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Inocycle Technology Tbk

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Inocycle Technology Tbk are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Inocycle Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Multi Bintang and Inocycle Technology

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

The idea behind Multi Bintang Indonesia and Inocycle Technology 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.