Correlation Between Multi Medika and Multi Prima

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

By analyzing existing cross correlation between Multi Medika Internasional and Multi Prima Sejahtera, you can compare the effects of market volatilities on Multi Medika and Multi Prima 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 Medika with a short position of Multi Prima. Check out your portfolio center. Please also check ongoing floating volatility patterns of Multi Medika and Multi Prima.

Diversification Opportunities for Multi Medika and Multi Prima

0.44

Correlation Coefficient

Multi Medika  Multi Prima

Very weak diversification

The 3 months correlation between Multi and Multi is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Multi Medika Internasional and Multi Prima Sejahtera in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi Prima Sejahtera and Multi Medika 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 Medika Internasional are associated (or correlated) with Multi Prima. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multi Prima Sejahtera has no effect on the direction of Multi Medika i.e., Multi Medika and Multi Prima go up and down completely randomly.

Pair Corralation between Multi Medika and Multi Prima

Assuming the 90 days trading horizon Multi Medika Internasional is expected to generate 2.82 times more return on investment than Multi Prima. However, Multi Medika is 2.82 times more volatile than Multi Prima Sejahtera. It trades about 0.08 of its potential returns per unit of risk. Multi Prima Sejahtera is currently generating about 0.1 per unit of risk. If you would invest  6,400  in Multi Medika Internasional on September 1, 2024 and sell it today you would earn a total of  1,100  from holding Multi Medika Internasional or generate 17.19% return on investment over 90 days.

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

Multi Medika Internasional  vs.  Multi Prima Sejahtera

Multi Medika Interna

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Multi Medika Internasional are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Multi Medika disclosed solid returns over the last few months and may actually be approaching a breakup point.

Multi Prima Sejahtera

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Multi Prima Sejahtera are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Multi Prima may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Multi Medika and Multi Prima

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

The idea behind Multi Medika Internasional and Multi Prima Sejahtera 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.