Correlation Between Multipolar Technology and DCI Indonesia

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

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

Diversification Opportunities for Multipolar Technology and DCI Indonesia

-0.62

Correlation Coefficient

Multipolar Technology  DCI Indonesia

Excellent diversification

The 3 months correlation between Multipolar and DCI is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Multipolar Technology Tbk and DCI Indonesia Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DCI Indonesia Tbk and Multipolar Technology 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 Technology Tbk are associated (or correlated) with DCI Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DCI Indonesia Tbk has no effect on the direction of Multipolar Technology i.e., Multipolar Technology and DCI Indonesia go up and down completely randomly.

Pair Corralation between Multipolar Technology and DCI Indonesia

Assuming the 90 days trading horizon Multipolar Technology Tbk is expected to generate 3.49 times more return on investment than DCI Indonesia. However, Multipolar Technology is 3.49 times more volatile than DCI Indonesia Tbk. It trades about 0.34 of its potential returns per unit of risk. DCI Indonesia Tbk is currently generating about -0.11 per unit of risk. If you would invest  360,000  in Multipolar Technology Tbk on September 12, 2024 and sell it today you would earn a total of  1,705,000  from holding Multipolar Technology Tbk or generate 473.61% return on investment over 90 days.

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

Multipolar Technology Tbk  vs.  DCI Indonesia Tbk

Multipolar Technology Tbk

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Multipolar Technology Tbk are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Multipolar Technology disclosed solid returns over the last few months and may actually be approaching a breakup point.

DCI Indonesia Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DCI 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 January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Multipolar Technology and DCI Indonesia

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

The idea behind Multipolar Technology Tbk and DCI 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.