Correlation Between Multipolar Tbk and Mandom Indonesia

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

By analyzing existing cross correlation between Multipolar Tbk and Mandom Indonesia Tbk, you can compare the effects of market volatilities on Multipolar Tbk and Mandom Indonesia 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 Mandom Indonesia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Multipolar Tbk and Mandom Indonesia.

Diversification Opportunities for Multipolar Tbk and Mandom Indonesia

0.52

Correlation Coefficient

Multipolar Tbk  Mandom Indonesia

Very weak diversification

The 3 months correlation between Multipolar and Mandom is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Multipolar Tbk and Mandom Indonesia Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mandom Indonesia Tbk 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 Mandom Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mandom Indonesia Tbk has no effect on the direction of Multipolar Tbk i.e., Multipolar Tbk and Mandom Indonesia go up and down completely randomly.

Pair Corralation between Multipolar Tbk and Mandom Indonesia

Assuming the 90 days trading horizon Multipolar Tbk is expected to generate 1.96 times more return on investment than Mandom Indonesia. However, Multipolar Tbk is 1.96 times more volatile than Mandom Indonesia Tbk. It trades about 0.03 of its potential returns per unit of risk. Mandom Indonesia Tbk is currently generating about -0.03 per unit of risk. If you would invest  10,400  in Multipolar Tbk on October 21, 2024 and sell it today you would earn a total of  1,200  from holding Multipolar Tbk or generate 11.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.58%
Values	Daily Returns

Multipolar Tbk  vs.  Mandom Indonesia Tbk

Multipolar Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Multipolar Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak 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.

Mandom Indonesia Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mandom Indonesia Tbk 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 Multipolar Tbk and Mandom Indonesia

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

The idea behind Multipolar Tbk and Mandom Indonesia 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.