Correlation Between Multipolar Tbk and Kawasan Industri

Can any of the company-specific risk be diversified away by investing in both Multipolar Tbk and Kawasan Industri 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 Multipolar Tbk and Kawasan Industri into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Multipolar Tbk and Kawasan Industri Jababeka, you can compare the effects of market volatilities on Multipolar Tbk and Kawasan Industri 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 Multipolar Tbk with a short position of Kawasan Industri. Check out your portfolio center. Please also check ongoing floating volatility patterns of Multipolar Tbk and Kawasan Industri.

Diversification Opportunities for Multipolar Tbk and Kawasan Industri

0.61

Correlation Coefficient

Multipolar Tbk  Kawasan Industri

Poor diversification

The 3 months correlation between Multipolar and Kawasan is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Multipolar Tbk and Kawasan Industri Jababeka in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kawasan Industri Jababeka and Multipolar Tbk 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 Multipolar Tbk are associated (or correlated) with Kawasan Industri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kawasan Industri Jababeka has no effect on the direction of Multipolar Tbk i.e., Multipolar Tbk and Kawasan Industri go up and down completely randomly.

Pair Corralation between Multipolar Tbk and Kawasan Industri

Assuming the 90 days trading horizon Multipolar Tbk is expected to generate 5.25 times more return on investment than Kawasan Industri. However, Multipolar Tbk is 5.25 times more volatile than Kawasan Industri Jababeka. It trades about 0.11 of its potential returns per unit of risk. Kawasan Industri Jababeka is currently generating about 0.23 per unit of risk. If you would invest  7,300  in Multipolar Tbk on September 3, 2024 and sell it today you would earn a total of  3,400  from holding Multipolar Tbk or generate 46.58% return on investment over 90 days.

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

Multipolar Tbk  vs.  Kawasan Industri Jababeka

Multipolar Tbk

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Multipolar Tbk are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Multipolar Tbk disclosed solid returns over the last few months and may actually be approaching a breakup point.

Kawasan Industri Jababeka

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kawasan Industri Jababeka are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Kawasan Industri disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Multipolar Tbk and Kawasan Industri

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

The idea behind Multipolar Tbk and Kawasan Industri Jababeka 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.